                      UNITED STATES COURT OF APPEALS
                           FOR THE FIFTH CIRCUIT
                          _______________________

                                 No. 92-8157
                           _______________________

                          UNITED STATES OF AMERICA,

                                                              Plaintiff-Appellee,

                                     versus

                             DONNA FRYDENLUND,
                    PERRY PRESSLEY and MAURY PAGE KEMP,

                                           Defendants-Appellants.
_________________________________________________________________

          Appeals from the United States District Court
                for the Western District of Texas
_________________________________________________________________
                          (May 4, 1993)


Before POLITZ, Chief Judge, GOLDBERG, and JONES, Circuit Judges.

EDITH H. JONES, Circuit Judge:

             Appellants     Maury    Kemp,       Perry     Pressley,    and   Donna

Frydenlund were convicted of bank fraud, in violation of 18 U.S.C.

§ 1344(1), and of conspiracy to commit bank fraud, in violation of

18 U.S.C. § 371.      All three were sentenced to terms of imprisonment

and were ordered to pay restitution of approximately $1.5 million.

Kemp   and   Pressley     challenge      their    sentences.         Pressley     and

Frydenlund challenge their convictions.                  Finding no reversible

error, we affirm.

                                         I.

             In   late   1989,    Kemp   owned     three      car   dealerships   in

California.       Frydenlund served as comptroller and general manager

of   those   businesses.         Pressley,    based      in    El   Paso,   was   the

comptroller for Kemp Group, a holding company for Kemp's business
entities, including the three California car dealerships. Pressley

was Kemp Group's only employee and prepared financial statements,

signed checks, and ran errands for Kemp.

          Kemp Group had a checking account at MBank in El Paso.

The three California dealerships had accounts at First Interstate

Bank in California.    As the businesses began to fail in late 1989

and 1990, Kemp devised a check-kiting scheme to keep them running

until he could sell them as ongoing businesses.         He instructed

Pressley to send blank Kemp Group checks to California, which would

then be filled out by Frydenlund in the amount needed to keep the

businesses' accounts current.      In return, Frydenlund would send

back checks drawn on the First Interstate accounts to Pressley in

El Paso to cover the amounts of the Kemp Group checks.       Pressley

would then deposit these checks in the MBank account.        Over the

next few months, hundreds of checks traveled back and forth in this

manner between Kemp Group and the California dealerships.

          In January 1991 First Interstate uncovered the scheme and

informed MBank that it was returning 37 checks totalling more than

$1.5 million.   MBank posted the checks as overdrafts.         A jury

convicted the three defendants of bank fraud and of conspiracy to

commit bank fraud.    The trial judge gave them prison sentences and

ordered them to pay restitution of approximately $1.5 million.

                                   II.

          Appellants    Pressley    and   Frydenlund   challenge   the

sufficiency of the evidence to convict them.     In such challenges,

the court must decide whether a rational jury could find evidence


                                    2
that establishes guilt beyond a reasonable doubt. United States v.

Espinoza-Seanez, 862 F.2d 526, 536 (5th Cir. 1988).                     Not every

reasonable       hypothesis    of    innocence      need   be   excluded    by   the

evidence.        Id.    And all reasonable inferences and credibility

choices    must    be   viewed      in   the    light    most   favorable   to    the

government.       Id.

               The jury in this case could reasonably conclude from the

evidence presented at trial that both Pressley and Frydenlund

knowingly participated in a scheme to defraud MBank and FIB.                     Both

Pressley and Frydenlund admit full knowledge of the scheme.                      They

also admit that they acted under Kemp's orders to carry the scheme

forward.       They argue in defense only that they lacked the specific

intent    to    deceive   or   cheat      the    bank.     These   arguments      are

unpersuasive.

               Check kiting is a scheme "designed to separate the bank

from its money by tricking it into inflating bank balances and

honoring checks drawn against accounts with insufficient funds."

United States v. Doherty, 969 F.2d 425, 428 (7th Cir.), cert.

denied, ____ U.S. ____, 113 S. Ct. 607, 121 L.Ed.2d 542 (1992); see

Williams v. United States, 458 U.S. 279, 281 n.1, 102 S. Ct. 3088,

3089 n.1, 73 L.Ed.2d 767 (1982).               Section 1344(1) does not require

a specific intent to permanently deprive the bank of its funds.                    It

is sufficient to knowingly participate in a scheme to trick the

bank into inflating bank balances by kiting checks between two or

more banks.       The bare act of check kiting defrauds the bank by




                                           3
temporarily placing the bank's funds at the disposal of the account

holder.1

           Notwithstanding     Pressley's   and   Frydenlund's    declared

intent that the banks not be permanently deprived of funds, these

convictions must be sustained. Both admitted full knowledge of the

check-kiting scheme.      They knew they were participating in check

kiting, and they knew that their activities would have the effect

of artificially inflating the balances of Kemp's accounts in MBank

and FIB. In extenuation, these appellants point out that they were

following Kemp's orders.       Because he was a wealthy, established

businessman who had recently injected $500,000 additional capital

into the California dealerships, they had every reason to believe

he did not plan to deprive the banks of their money or to inflict

losses on them.      Kemp, to his credit, accepted full personal

responsibility for the scheme and testified in his employees'

behalf.    There is pathos in Kemp's and the appellants' positions,

but it cannot overcome the jury verdict finding them guilty under

§ 1344(1).

           There was also ample evidence that the defendants took

part in a conspiracy to keep the check kite operating for months.

The defendants    acted   in   concert   with   Kemp   to   facilitate   the


1.   At least six Circuits have expressly held that bare check-
kiting schemes fall within the scope of section 1344(1).        See
Doherty, 969 F.2d at 428-29; United States v. Stone, 954 F.2d 1187,
1189-91 (6th Cir. 1992); United States v. Fontana, 948 F.2d 796,
802 (1st Cir. 1991); United States v. Celesia, 945 F.2d 756, 758-59
(4th Cir. 1991); United States v. Schwartz, 899 F.2d 243, 246-47
(3d Cir.), cert. denied, 498 U.S. 901, 111 S. Ct. 259, 112 L.Ed.2d
217 (1990); United States v. Bonnett, 877 F.2d 1450, 1454-56 (10th
Cir. 1989).

                                    4
exchange of hundreds of checks.       To find a conspiracy violation

under 18 U.S.C. § 371, a jury need only find an agreement between

two or more persons to violate the law and an overt act by one

member of the conspiracy in furtherance of the conspiracy.         A

specific agreement need not be shown, but may be inferred from

concert of action.   See United States v. Magee, 821 F.2d 234, 239

(5th Cir. 1987).     Here, there was clearly a concert of action

between Kemp, on the one hand, and his financial managers, on the

other.

                                III.

           Appellants Kemp and Pressley argue that the district

court erred in calculating their base offense level under the

sentencing guidelines.     Persons convicted of check kiting are

sentenced under section 2F1.1 of the Guidelines.    See Doherty, 969

F.2d at 430; United States v. Haddock, 956 F.2d 1534; 1554 (10th

Cir.), cert. denied, _____ U.S. _____, 113 S. Ct. 88, 121 L.Ed.2d

50 (1992); United States v. Carey, 895 F.2d 318, 323 (7th Cir.

1990); United States v. Bolden, 889 F.2d 1336, 1339 (4th Cir.

1989).   The ultimate overdraft in this case was $1,552,430.99, and

the district court used that amount for the purpose of calculating

the appropriate upward adjustment under section 2F1.1(b)(1).

           The appellants argue that it was inappropriate to use the

total amount of the overdraft, because after the dust settled

MBank's loss was much less than the amount of the overdraft.     The

defendants believe that the real loss to MBank is zero, because

Kemp executed a promissory note to MBank for the full amount of the


                                  5
overdraft, secured by a second lien on the California dealership

properties, and because Kemp will eventually pay back MBank when he

sells the dealerships.      According to the appellants, because

MBank's losses, if any, will be lower than the amount of the

overdraft at the time the scheme was uncovered, the court erred by

sentencing them according to the higher, "inflated" number.

          Appellants characterize their argument as directed not at

the district court's finding of MBank's actual loss, which is

shielded by the clearly erroneous rule on appeal,2 but at its legal

misapplication of the guidelines, a matter we review de novo.3      The

appellants contend that check kiting should be treated like a

fraudulently   obtained   loan,   for   which   an   application   note

accompanying § 2F1.1 specifies that the victim's (i.e., the bank's)

loss "is the amount of the loan not repaid at the time the offense

is discovered," reduced by whatever the bank might recover from

collateral pledged to secure the loan. U.S.S.G. § 2F1.1 appl. note

7(b).

          We reject this argument for two reasons.        First, check

kiting is not more equivalent to a fraudulent loan transaction than

to simple theft.   As the government points out, the bank at least

voiced its approval of the credit extended on a fraudulently

obtained loan, while a check kite is done surreptitiously precisely

because the bank would under no circumstances have lent to the



2.   United States v. Rodriguez, 897 F.2d 1324, 1325 (5th Cir.),
cert. denied, 498 U.S. 857, 111 S. Ct. 158, 112 L.Ed.2d 124 (1990).

3.   United States v. Ruff, 984 F.2d 635, 639 (5th Cir. 1993).

                                  6
kiter.   The bank also voluntarily places a limit on its risk when

it lends money, but it is at the mercy of the check kiter for the

amount of loss he may cause.

          Second, no matter which part of § 2F1.1 is applied, the

sentencing standard depends upon the bank's actual loss.    Kemp did

not disagree that the out-of-pocket loss to MBank was $1.5 million:

he agreed to repay that amount.   The only question here is whether

his agreement, his good intentions, and the second lien on the

California dealerships reduced that actual loss.4     The district

court implicitly found they did not, and this finding is not

clearly erroneous.    At the time of sentencing, Kemp's financial

empire was in trouble, the appraisals of the dealerships could be

seen as optimistic, the sales proceeds for one were tied up in

litigation, and no payments had been made to reduce the $1.5

million loss.   Without hearing further explanation, the court was

not required to credit the bank's lower estimate of its loss to a

third party.    Thus, although it is possible that the actual loss

may in some cases be less than the overdraft when the kite is

discovered, Kemp did not persuade the court of that in his case.

          The Seventh Circuit has rejected a similar argument in

United States v. Carey, 895 F.2d 318 (7th Cir. 1990).      In Carey,

the defendant's check-kiting scheme left a $220,000 deficit in his



4.   The fraudulent loan cases cited by Kemp are distinguishable on
the facts, because in each of those, the "actual loss" was subject
to reduction by actual payments made on the loans before default
and valuable collateral given for those loans. See United States
v. Kopp, 951 F.2d 521 (3d Cir. 1991); United States v. Rothberg,
954 F.2d 217 (4th Cir. 1992); Haddock, 956 F.2d at 1554-55.

                                  7
account when the scheme was finally exposed.    The district court

granted Carey a downward departure because he had restored all but

$20,000 of the money owed to the bank.         The Seventh Circuit

reversed, holding that restitution did not alleviate the fact that

he had defrauded the bank of $220,000 before his artifice was

discovered.   The entire loss was due directly to Carey's actions,

and his restitution of the lion's share of the money, though

commendable, did not decrease the seriousness of the crime he had

committed.    The district court in this case did not erroneously

apply the Guidelines to determine the appellants' sentences.5

                            CONCLUSION

          For the foregoing reasons, the judgment and sentences of

each appellant are AFFIRMED.




5.   The government suggests by innuendo that the sum total of the
defendants' fraud approached $47,000,000, the total of all of the
checks used in the kiting scheme. That figure grossly misstates
the nature of the scheme.    Each check worked only a temporary
float.   A check-kiting scheme involving only two checks would
inflate the account balances for only a very short time, perhaps
only a few days. In a more involved scheme, each check replaces
the previous checks, merely sustaining the float, rather than
adding to the amount floated. See United States v. Deutsch, ____
F.2d ____, ____, 1993 W.L. 32685, at *7 (2d Cir. Feb. 11, 1993).

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