Appellate Case: 20-3232 Document: 010110767996 Date Filed: 11/14/2022 Page: 1
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`FILED
`United States Court of Appeals
`Tenth Circuit
`
`November 14, 2022
`
`Christopher M. Wolpert
`Clerk of Court
`
`PUBLISH
`
`UNITED STATES COURT OF APPEALS
`
`FOR THE TENTH CIRCUIT
`_________________________________
`
`UNITED STATES OF AMERICA,
`
` Plaintiff - Appellee,
`
`v.
`
`TROY A. GREGORY,
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` Defendant - Appellant.
`_________________________________
`
`
`
`
`
`No. 20-3232
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`Appeal from the United States District Court
`for the District of Kansas
`(D.C. No. 2:17-CR-20079-JAR-1)
`_________________________________
`
`Solomon L. Wisenberg, Nelson Mullins Riley & Scarborough LLP, Washington, D.C.
`(Beverly A. Pohl, Nelson Mullins Broad and Cassel, Fort Lauderdale, Florida, and Reed
`J. Hollander, Nelson Mullins Riley & Scarborough LLP, Raleigh, North Carolina, with
`him on the briefs), on behalf of the Appellant.
`
`Francesco Valentini, Trial Attorney, U.S. Department of Justice, Criminal Division,
`Appellate Section, Washington, D.C. (Nicholas L. McQuaid, Acting Assistant Attorney
`General, and Daniel S. Kahn, Acting Deputy Assistant Attorney General, U.S.
`Department of Justice, with him on the brief), on behalf of the Appellee.
`
`
`_________________________________
`
`Before HARTZ, BACHARACH, and EID, Circuit Judges.
`_________________________________
`
`HARTZ, Circuit Judge.
`_________________________________
`
`
`
`
`
`

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`Appellate Case: 20-3232 Document: 010110767996 Date Filed: 11/14/2022 Page: 2
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`Defendant Troy A. Gregory, a former senior vice president of University
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`National Bank (UNB) in Lawrence, Kansas, was charged with one count of
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`conspiracy to commit bank fraud in violation of 18 U.S.C. § 1349, four counts of
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`bank fraud in violation of 18 U.S.C. § 1344, and two counts of making false bank
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`entries in violation of 18 U.S.C. § 1005. These charges arose from Defendant’s
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`arrangement of a $15.2 million loan by 26 banks to fund an apartment development
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`by established clients of UNB.
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`The four bank-fraud counts, each corresponding to a specific “victim bank,”
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`alleged that to secure the banks’ participation in funding the loan, Defendant
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`knowingly made three material misrepresentations: (1) that the borrowers were
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`financially strong; (2) that the apartment-complex land would be “free and clear” of
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`debt by the time of the loan; and (3) that the borrowers had $1.705 million in two
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`certificates of deposit (CDs) at UNB on April 11, 2008, to be pledged as collateral.1
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`The two counts of making false bank entries were based on Defendant’s listing two
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`CDs as collateral, and creating corresponding security agreements, when no such
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`CDs existed. After a ten-day trial, including two days of deliberations, a jury in the
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`United States District Court for the District of Kansas found Defendant guilty on all
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`counts except the conspiracy count, on which the jury could not reach a unanimous
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`verdict. The court sentenced Defendant to 60 months in prison and three years of
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`supervised release.
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`1 A certificate of deposit (CD) certifies that a certain amount of money has
`been deposited in a bank to remain there for a certain period of time.
`2
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`Defendant appeals the district court’s denial of (1) his motion for a judgment
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`of acquittal and (2) his motion for a new trial on the ground that the government’s
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`extended hypothetical in closing argument was not based on facts in evidence and
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`constituted prosecutorial misconduct. Exercising jurisdiction under 28 U.S.C. § 1291,
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`we affirm. Defendant’s conviction was supported by sufficient evidence and the
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`government’s closing argument was rooted in evidence presented at trial or
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`reasonable inferences drawn from that evidence.
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`I.
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`BACKGROUND
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`Defendant was a longtime UNB employee and executive who served as the
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`loan officer for dozens of loans to two limited liability companies, Big D
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`Development and Big D Construction (collectively “Big D”), and their owners. Big
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`D’s owners included David Freeman (the largest owner) and two limited liability
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`companies—Opportune and JMD. Opportune was owned by William Skepnek and
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`Brennan Fagan. JMD was owned by John Duncan Jr.
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`In 2006, Big D developed two residential subdivisions (the “Sutter
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`developments”) in Junction City, Kansas, which comprised mostly single-family
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`residences. Big D anticipated population growth in the area following the expansion
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`of the nearby military base, Fort Riley. UNB financed the development, with
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`Defendant acting as the loan officer; other banks also provided funds through a
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`participation loan for which UNB was the originating bank. By including other
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`banks, a participation loan allows a bank to lend some of the money for a project
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`when the full amount would exceed the bank’s legal lending limit—a cap imposed by
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`regulators on the amount that a bank can lend to an individual borrower based on the
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`bank’s capital—or would otherwise be considered uncomfortably large for the bank.
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`In a participation loan the “originating” or “lead” bank (here, UNB) is typically the
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`only bank to deal with the borrowers directly. The lead bank may deal directly with
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`each of the participating banks or deal solely with a “correspondent” bank that
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`handles matters with the participants. Bankers’ Bank of Kansas (BBOK) served as
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`the correspondent bank for the Sutter developments.
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`The Sutter-development units did not sell as expected. By June 2007, 242 of
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`the 538 lots remained unsold; and little changed through the fall, leaving Big D with
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`virtually no income. In addition, Big D was unable to secure much-needed funding
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`from the state’s Rural Housing Incentive District program, which provides certain
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`payments to developers in qualifying areas. According to Big D owner Fagan, by late
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`2007 Big D was in a “[t]errible” financial position. R., Vol. IV at 818. It still owed
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`UNB $1.9 million on the Sutter developments and was unable to keep up with
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`payments on those and other debts to UNB. John Larkin, the owner of Larkin
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`Excavating—which performed excavating work on the Sutter developments—
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`testified that he was never timely paid for his work, with payments on invoices being
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`90, or even 120, days past due.
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`Individual Big D owners were struggling too. Duncan testified that he was
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`having “cash flow issues” during this time and was unable to keep up with his debt at
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`UNB. R., Vol. VII at 1693, 1700. By mid-2007 he owed more than $1.9 million on
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`his own loans at UNB. He testified that he was unable to make any payments on the
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`loans and that he worked with Defendant to renew or extend past-due loans, often
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`just for a short period; he did not recall ever discussing with Defendant during this
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`time how a loan would be repaid by the due date. For example, he testified that he
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`took out a $600,000 loan from UNB (for which Defendant was the loan officer) in
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`March 2007 to pay down a $3.8 million loan from another bank. When the UNB loan
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`came due in June 2007, he was unable to pay it back and had to renew the loan
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`“[c]ountless times.” R., Vol. VII at 1694. Fagan also testified that his personal
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`financial position “wasn’t good” in late 2007. R., Vol. IV at 819. Still, in November
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`2007, Defendant arranged for Fagan to incur further debt by taking out a $55,000
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`loan with UNB (for which Defendant was the loan officer) to help pay past-due
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`interest on Big D loans. Just how bad the financial situation of the borrowers was
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`will be described more fully in the discussion of the sufficiency of the evidence.
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`A. Origins of the Bluejay Loan
`In an effort to end their financial distress, some of the Big D owners conceived
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`of developing an apartment complex in Junction City—dubbed the Quinton Point
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`Apartments. They believed that once Fort Riley expanded, there would be demand
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`for rentals, particularly from military families. As Duncan put it, the Big D owners
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`thought that this project was their “golden goose,” the “end-all, be-all” solution to
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`their financial problems. R., Vol. VII at 1712, 1731.
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`The Big D owners formed a new limited liability company for the Quinton
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`Point venture, Bluejay Properties. By the beginning of 2008, Bluejay’s owners
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`included the above-mentioned Big D owners—Freeman, Skepnek, Fagan, and
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`Duncan—either individually or via entities controlled by them; and later they added
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`Larkin, whose company was still owed $1 million for its excavation work on the
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`Sutter developments. Big D would serve as the contractor on the Quinton Point
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`project. The Big D owners hoped to make money as owners of Big D on the
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`construction itself (the construction fees earned on the project would help pay down
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`its debt) and as owners of Bluejay when they sold the complex.
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`Bluejay acquired some land, obtained an appraisal valuing the planned
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`complex at $20.2 million, and received a letter of intent from a potential buyer, TIC
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`Capital, LLC, to purchase the complex for $17.952 million upon completion. The
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`estimated construction budget for the project was just under $14.4 million, and the
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`Bluejay owners proposed borrowing that amount from UNB. Fagan testified that
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`Defendant seemed “committed to making this loan happen.” R., Vol. IV at 825.
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`To secure approval for loans over $250,000, Defendant had to submit a credit
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`request to the bank’s loan committee. If the committee approved the credit request,
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`UNB’s credit department would obtain the necessary paperwork and prepare the loan
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`for closing. A $14.4 million loan far exceeded UNB’s legal lending limit of just over
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`$2 million per borrower and each of the individuals was heavily in debt—with Fagan
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`and Duncan just below the lending limit. UNB would therefore need help from other
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`banks to join in a participation loan.
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`B.
`UNB’s Loan Statement and Approval
`To initiate the approval process for the Bluejay loan, Michael Bartlow, a UNB
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`vice president of credit administration, drafted a Loan Application/Purpose Statement
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`(Loan Statement) dated December 5, 2007. Bartlow’s duties included preparing loan
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`applications, occasional inspections of construction sites, and other tasks as needed
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`by management. He testified that Defendant supplied the underlying information that
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`Bartlow used to draft the Loan Statement and that Defendant reviewed and approved
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`the document. In addition to listing basic terms and repayment sources (namely, sale
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`of the apartment complex), the Loan Statement included each individual owner’s
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`total loan exposure at UNB, brief narrative summaries of the borrowers’ financial
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`statements, and an overview of the project budget. Defendant presented the
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`information from the Loan Statement to a UNB committee on December 5, 2007. The
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`committee approved the loan, “subject to . . . review and acceptance of the contract
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`with TIC Capital [which had signed a letter of intent] to purchase the apartment
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`complex after completion”; the loan was also approved by three members of the
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`board of directors. R., Vol. IX at 2216. (The TIC contract was executed in April
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`2008, before the loan closed.)
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`Defendant then enlisted the help of BBOK as the correspondent bank with
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`responsibility for soliciting and managing relationships with participant banks. This
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`was a familiar role for BBOK. As a “banker’s bank,” its customers were other banks
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`rather than the public, and it often sought and facilitated loans in which a number of
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`smaller banks could participate. UNB was responsible for gathering the relevant
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`information from its records and from the borrowers and providing that information
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`to BBOK so potential participant banks could make informed decisions. UNB would
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`Appellate Case: 20-3232 Document: 010110767996 Date Filed: 11/14/2022 Page: 8
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`also manage the relationship with the borrowers, so the other banks would not
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`communicate directly with them.
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`On December 10, 2007, Defendant sent the Loan Statement to Craig Ellis, a
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`loan officer at BBOK, in an email that stated: “Please review and call me so we can
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`go over everything.” R., Vol. XIII at 3026.
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`C.
`BBOK’s Offering Package to Participant Banks
`Ellis did not testify at trial, but both UNB and BBOK employees testified that
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`substantive communications regarding the loan would typically have been between
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`Ellis and Defendant (although their assistants exchanged paperwork). Rhonda Scott, a
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`UNB loan administrative officer who reported to Defendant, testified that Defendant
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`was responsible for handling the communications and relationship with BBOK,
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`where Ellis was the primary point of contact. And Jeannie Dailey, a former BBOK
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`loan officer who helped Ellis analyze the proposed loan, testified that Ellis and
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`Defendant had conversations about the loan and any questions she had about the loan
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`would flow through Ellis to Defendant and back to her through Ellis; any relevant
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`information about the borrowers would come from Defendant.
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`BBOK performed its own analysis of the materials obtained from UNB and
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`submitted a proposed Offering Package for approval by its loan committee and board
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`of directors, which is composed of owners of other banks. The Offering Package
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`included a seven-page Loan Summary and Narrative drafted by BBOK, a copy of
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`UNB’s Loan Statement, the borrowers’ financial statements, the construction budget,
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`an appraisal summary, a market study on similar apartment complexes in the area,
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`and news articles about development in Junction City.
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`The BBOK board reviewed the proposal and approved it on January 25, 2008,
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`subject to the condition that the borrowers put down 15% in equity or cash down
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`payment. The loan amount also increased from $14.4 to $15.2 million. The Bluejay
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`owners had initially hoped that they would need to provide only 10% cash or equity
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`and asked Defendant if other banks would take on the loan for less than 15%. Fagan
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`testified that the Bluejay owners knew it would be difficult to come up with the
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`required 15% and that they explored alternative solutions. He said that at one point
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`they discussed the possibility of a private lender pledging a letter of credit for $2
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`million on behalf of Bluejay; but “that was ultimately determined to be insufficient”
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`because BBOK “wanted hard assets.” R., Vol. IV at 827. Fagan “thought the deal was
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`dead.” Id.
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`On February 1, Ellis emailed Defendant a copy of what had been submitted to
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`the BBOK board, with a cover note stating: “Troy– Our presentation as we
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`discussed.” R., Vol. XIII at 3054. On March 21, BBOK distributed to the participant
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`banks a virtually identical Offering Package.
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`The March 21 Offering Package: (1) listed as collateral the apartment complex
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`and “$1,400,000 in a certificate of deposit @ UNB pledged to the loan,” R., Vol. XII
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`at 2879; (2) said that the “Borrower’s equity in this project is the land which is owned
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`free and clear,” id. at 2883 (emphasis added); and (3) provided financial information
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`about Bluejay owners Freeman, Duncan, Skepnek, and Fagan, who were guarantors
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`on the loan (there was little information available about Bluejay itself, as it was a
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`new entity).
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`The financial information consisted of a brief statement and chart overview of
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`the owners’ net worth and liquid assets. For more detail the Offering Package pointed
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`to UNB’s Loan Statement, as well as individual financial statements prepared by the
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`borrowers and sent to BBOK by UNB. The Offering reported that UNB’s experience
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`with Freeman (Big D’s largest owner) “has been very positive and he has shown a
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`trend of successful operations,” R., Vol. XII at 2882; and it added that Freeman
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`would soon have much greater liquidity as he would be receiving almost $4 million
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`from Junction City for development work on the Sutter developments. In a closing
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`bulleted summary of the strengths and weaknesses of the loan, BBOK included as
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`weaknesses the “Limited liquidity of the members” and “Limited hard cash in the
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`project.” Id. at 2884.
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`D.
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`The Participation Agreements, Loan Documents, and Loan
`Closing
`UNB and BBOK signed a Participation Agreement and Certificate, dated April
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`11, 2008. To provide the required cash or collateral of 15% of the loan (15% of $15.2
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`million = $2.28 million), it specified that the loan was secured by (1) a “Security
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`Agreement from Big D Development dated 4-11-08 covering a CD for $205,000”;
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`(2) a “Security Agreement from John Duncan dated 4-11-08 covering a CD for
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`$1,500,000.00,”2 R., Vol. XI at 2629; and (3) a mortgage on the land for the
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`development, which had been represented in the Offering Statement as being owned
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`free and clear and having an appraised value of $575,000. On April 11 Freeman,
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`Duncan, Larkin, Fagan, and Skepnek had come to Defendant’s office to sign the loan,
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`the mortgage, and the security agreements pledging as collateral two certificates of
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`deposit (identified by their account numbers) authorized by Defendant and dated
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`April 11. Each CD stated that “Depositor . . . has deposited with [UNB] the [relevant]
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`amount,” that the opening date was “4/11/08,” and that the “opening deposit amount”
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`was, respectively, $205,000 and $1.5 million. R., Vol. X at 2476, 2480. Catherine
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`Gaines, a BBOK credit-administration manager who drafted the agreement, testified
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`that she “described all the collateral based on the documents I had received from
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`[UNB],” which apparently included signed copies of the security agreements for the
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`CDs dated April 11. R., Vol. VII at 1632.
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`The Participation Agreement also included the following commitment:
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`Originating Bank [UNB] expressly states that is [sic] has no actual
`knowledge, nor made any misrepresentation of fact to Purchasing Bank
`[BBOK], regarding any material adverse credit experience with Borrower,
`or any other party to the Loan, including, but not limited to, overdrafts, loan
`or credit loss charge-offs, classification of loan by bank examiners,
`bankruptcy proceedings, or loan delinquency of 60 days or more, that has
`not been disclosed in writing by Originating Bank to Purchasing Bank prior
`to acceptance of this Participation.
`
`
`2 Although the Offering Package sent to the participants on March 21 initially
`represented that there was “$1,400,000 in a certificate of deposit @ UNB pledged to
`the loan,” R., Vol. XII at 2879, this number later increased to $1.705 million in CDs,
`apparently to help reach the 15% cash-or-equity requirement. The updated CD value
`(at $1.705 million) and the land (valued at $575,000) together totaled $2.28 million.
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`R., Vol. XI at 2630.
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`
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`On April 17 the participant banks each received and signed their own
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`participation agreements with BBOK—referred to as addendums to the UNB-BBOK
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`agreement. These agreements included the same representations as above about the
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`collateral and they stated that the participants were agreeing to the terms and
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`conditions set forth in the UNB-BBOK Participation Agreement.3
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`The loan closed and the first installment of about $2.4 million was disbursed
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`on April 28. The evidence at trial showed that there were no CDs on April 114 and
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`the land, rather than being free and clear, was encumbered by prior liens exceeding
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`the value of the land. Contrary to the participation agreements, the CDs were paid for
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`and title to the land was cleared only when the loan was closed—by using proceeds
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`of the Bluejay loan and additional loans to Duncan and Freeman not disclosed to the
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`3 There was some dispute at trial about when the UNB-BBOK Participation
`Agreement was signed. The jury was provided two copies of the agreement; both are
`signed by Defendant and Ellis and the date next to Ellis’s signature is April 11 on
`both. On one, the date next to Defendant’s signature is April 28; on the other, there is
`a clearly different signature of Defendant and there is no date next to it. Defendant
`maintains that he signed the agreement on April 28 and does not explain when the
`other copy was executed. But the jury could reasonably infer that the copy with the
`undated signature was signed before April 17, when the participation agreements
`were sent to the participant banks. In any event, we fail to see any relevance of the
`signing date to the fraud allegations.
`4 Defendant suggests that the CDs existed but were just “unfunded.” But, as
`the FDIC examiner testified, “[T]here is [no] such thing as an unfunded CD.” R. Vol.
`III at 642. No one would say that he has an “unfunded $100,000 in his bank account.”
`In any event, the CDs stated that the depositor had deposited with UNB the amount
`stated.
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`participating banks. In our discussion of the sufficiency of the evidence, we will
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`provide details of the deception involved in this effort.
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`II.
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`SUFFICIENCY OF THE EVIDENCE
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`“In determining whether the government presented sufficient evidence to
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`support the jury’s verdict, this court must review the record de novo and ask only
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`whether, taking the evidence—both direct and circumstantial, together with the
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`reasonable inferences to be drawn therefrom—in the light most favorable to the
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`government, a reasonable jury could find Defendant guilty beyond a reasonable
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`doubt.” United States v. Scull, 321 F.3d 1270, 1282 (10th Cir. 2003) (brackets and
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`internal quotation marks omitted).
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`A.
`Bank Fraud
`The federal bank-fraud statute prohibits the execution or attempted execution
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`of a scheme or artifice (1) “to defraud a financial institution,” 18 U.S.C § 1344(1), or
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`(2) “to obtain any of the moneys, funds, . . . or other property owned by, or under the
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`custody or control of, a financial institution, by means of false or fraudulent
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`pretenses, representations, or promises,” Id. § 1344(2). Defendant was charged, the
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`jury instructed, and the jury found him guilty under both prongs of § 1344 for all four
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`counts of bank fraud, each one of which corresponds to a victim bank. His conviction
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`stands if a reasonable jury could have found him guilty under either prong. See
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`United States v. Iverson, 818 F.3d 1015, 1026 (10th Cir. 2016).
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`To prove a § 1344(1) violation, the government must show that “(1) the
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`defendant knowingly executed or attempted to execute a scheme or artifice to defraud
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`a financial institution; (2) the defendant had the intent to defraud a financial
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`institution; and (3) the bank involved was federally insured.” United States v.
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`Flanders, 491 F.3d 1197, 1212 (10th Cir. 2007). To prove a § 1344(2) violation, the
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`government can show “(1) that the defendant knowingly executed or attempted to
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`execute a scheme . . . to obtain property by means of false or fraudulent pretenses,
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`representations or promises; (2) that defendant did so with the intent to defraud; and
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`(3) that the financial institution was then [federally] insured.”5 United States v.
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`Rackley, 986 F.2d 1357, 1360–61 (10th Cir. 1993). Section 1344(2) does not require
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`intent to defraud the financial institution, just the third party whose property is being
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`taken. See Loughrin v. United States, 573 U.S. 351, 353 (2014).
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`Under both prongs, fraud “requires a misrepresentation or concealment of
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`material fact.” Flanders, 491 F.3d at 1212 (internal quotation marks omitted). The
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`jury was instructed that Defendant could be liable as a principal under 18 U.S.C. § 2
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`if the jury found that he aided, abetted, counseled, commanded, induced or procured
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`bank fraud. The jury could also find Defendant guilty if he “willfully cause[d] an act
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`to be done which if directly performed by him or another” would constitute bank
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`fraud. R., Vol. II at 360. For each of the four bank-fraud counts, the government
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`alleged that Defendant made or caused to be made three independently sufficient
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`misrepresentations with intent to defraud: (1) that the borrowers were financially
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`strong; (2) that the borrowers would bring the Quinton Point land free and clear of
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`5 BBOK and the four victim banks are all federally insured.
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`any debt; and (3) that the borrowers had $1.705 million in CDs at UNB as of April
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`11, 2008.
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`The government introduced sufficient evidence from which a reasonable jury
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`could find the elements of bank fraud beyond a reasonable doubt. To start with, a
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`jury could reasonably conclude that a competent banker would have been unlikely to
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`participate in the Bluejay loan if any of the misrepresentations had been corrected. To
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`reach this conclusion the jurors needed to be educated on the factors that enter into a
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`banker’s decision to grant a loan. They were informed at trial that more is necessary
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`than just a proposed reasonable use of the borrowed money (such as a building
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`project) that is expected to earn a profit. After all, things do not always go as
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`planned. (The record indicates that the completed Quinton Point project sold for less
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`than $8 million, not the proposed $17.952 million.)
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`Kaye Finn, a senior risk-management examiner for the Federal Deposit
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`Insurance Corporation (FDIC), and representatives from each of the four victim
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`banks identified in the indictment—Blake Heid, president and CEO of First Option
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`Bank; Donald Whelchel, loan officer at Peoples State Bank; Patrick Walsh, a member
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`of the Board of Directors of Lyndon State Bank; and David Brownback, president
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`and CEO of Citizens State Bank and Trust—testified about the types of information
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`banks evaluate and expect to receive when they are asked to consider a loan, enabling
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`them to assess the risk and make reasonable decisions. In addition to the terms of the
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`loan itself, potential lenders consider the character of the borrowers, their capacity to
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`repay, and what they have pledged as collateral (which some of the representatives
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`referred to as the three Cs of credit).
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`Character refers to how trustworthy a borrower is in repaying its debts. The
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`bank looks at the borrower’s credit history and how it has repaid loans in the past as
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`indications of how the borrower will uphold its obligation if a loan is made. Lenders
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`need to know the character of both the borrower and those serving as guarantors on
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`the loan.
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`Capacity to repay is an assessment of the borrower’s overall financial status,
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`including its cash flow, liquidity, and other outstanding debts. To assess capacity,
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`banks rely on financial statements and, as when assessing character, the borrower’s
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`loan history. In the context of a participation loan, representations by the originating
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`bank about the history of its relationship with a borrower—who is often unknown to
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`the prospective participants—are critical. Repeat delinquencies and overdrawn
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`accounts “raise[] a red flag.” R., Vol. III at 637.
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`Finally, the collateral pledged to secure a loan reduces risk for lenders in two
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`ways: First, it ensures that the borrower has “skin in the game,”—i.e., that it has its
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`“own money on the line [and not just] borrowed funds.” R., Vol. VIII at 1895. As one
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`bank representative put it: “[W]hen people have to put money down . . . , then they
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`usually have a higher tendency to pay those loans back.” R., Vol. III at 681. Second,
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`if there are problems collecting the money owed, the banks can rely on the collateral
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`for partial repayment.
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`As the FDIC examiner and the officers from the victim banks testified, banks
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`do not make loans unless they are confident about these three Cs of credit. A
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`reasonable jury could find that the Bluejay loan failed miserably on all accounts.
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`Because of Defendant’s misrepresentations, however, the participating banks were in
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`the dark about these serious shortcomings.
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`1.
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`Financial strength of borrowers
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`We begin with the allegation in the indictment that Defendant misrepresented
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`the borrowers’ financial strength—in other words, their character and capacity to
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`repay the loan. The participating banks based their decisions on the Offering
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`Package—which included and was derived from information provided by UNB. The
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`officers from the victim banks testified that they rely on information from the lead
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`bank and expect it to be forthcoming in describing what it knows about the
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`borrowers. As Brownback of Citizens State Bank and Trust explained: “[W]e really
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`can’t judge character ourselves so we’re looking for something from the originating
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`bank who does have that ability . . . and . . . character is the [] No. 1 thing in making
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`a loan decision and next is the ability to pay.” R., Vol. VIII at 2013–14. Heid of First
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`Option Bank testified that he trusts loan offerings—although completed by another
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`bank—because he “expect[s] bankers to be truthful.” R., Vol. III at 685. Cf. R., Vol.
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`VIII at 1895 (Walsh agreeing that if the originating bank “knew about a poor history
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`of paying back loans, [he would] have expected that to be communicated to [him]”);
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`R., Vol. V at 1362 (former BBOK employee Dailey testified that “full disclosure”—
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`“put[ting] everything on the table, good or bad,” is a “concept well understood in the
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`banking community”). Indeed, in his testimony in a deposition for civil litigation
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`related to the Bluejay loan, Defendant himself stated that if he were reviewing a
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`participation opportunity, “he would want to know about the stability of the borrower
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`just as if he were originating the loan himself.” Ex. 444-D. And he further testified
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`that as a participant bank “you would have to rely more on . . . the bank’s history
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`with their borrower,” including delinquencies, which would typically be included in a
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`“write up” by that bank. Id. To that end, the Participation Agreement, as quoted
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`above, required UNB to provide any adverse information about the borrowers that
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`occurred before acceptance of the participation loan but had not yet been disclosed.
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`Two statements in the Offering Package indicated that UNB’s experience with
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`the borrowers had been a good one. First, the Loan Statement prepared by UNB
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`assigned a risk code of 4—on a scale of 1 (virtually no risk) down to 9 (loss assets)
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`—to the Bluejay loan “because of good collateral values and the financial strength of
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`the borrowers individually and collectively.” R., Vol. XII at 2888. UNB’s internal
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`loan policy describes grade four as follows: “This rating will be applied to those
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`credits that are of average risk. Typical borrowers are small or middle market
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`operations. Although results may be uneven, only normal amount of monitoring is
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`required.” R., Vol. XIV at 3494. Brownback from Citizens State Bank and Trust
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`testified that although each bank has its own risk scale (e.g., 1-to-7, 1-to-10) he could
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`infer that a rating of four “typically” meant that it was “not a problem loan.” R., Vol.
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`VIII at 2076. In any event, the statement that the rating was based on “the financial
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`strength of the borrowers individually and collectively” would be most peculiar if the
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`author