15 F.3d 623 (7th Cir. 1993), 93-1184, United States v. Van Engel

Docket Nº:93-1184, 93-1255.
Citation:15 F.3d 623
Party Name:UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee, v. Kurt Henry VAN ENGEL, Defendant-Appellee/Cross-Appellant.
Case Date:December 20, 1993
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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15 F.3d 623 (7th Cir. 1993)

UNITED STATES of America, Plaintiff-Appellant/Cross-Appellee,

v.

Kurt Henry VAN ENGEL, Defendant-Appellee/Cross-Appellant.

Nos. 93-1184, 93-1255.

United States Court of Appeals, Seventh Circuit

December 20, 1993

Argued Nov. 3, 1993.

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R. Jeffrey Wagner, Francis D. Schmitz (argued), Eric J. Klumb, Asst. U.S. Attys., Milwaukee, WI, for U.S. in No. 93-1184.

R. Jeffrey Wagner, Paul Kanter, Chris R. Larsen (argued), Eric J. Klumb, Asst. U.S. Attys., Milwaukee, WI, for U.S. in No. 93-1255.

Janice A. Rhodes, Stephen E. Kravit (argued), Kravit, Gass & Weber, Milwaukee, WI, for Kurt Van Engel in both cases.

Before POSNER, Chief Judge, COFFEY, Circuit Judge, and ZAGEL, District Judge. [*]

POSNER, Chief Judge.

The increase in the number of federal prosecutors in recent years has brought in its train problems of quality control. These problems led the district judge in this case to dismiss a number of counts of a fraud indictment, 809 F.Supp. 1360 (E.D.Wis.1992), precipitating this appeal by the government under 18 U.S.C. Sec. 3731 and a cross-appeal by the defendant asking us to throw out the entire indictment.

Kurt Van Engel, the defendant, a wholesale distributor of produce, fell out with his partners, Baake and Zingale. They brought civil RICO suits against him alleging as predicate offenses insurance fraud, the skimming of company funds by checks made out to a fictitious payee, and other criminal misconduct. Van Engel was represented in these suits by a former assistant U.S. attorney in the Milwaukee office of the Department of Justice, Stephen Kravit. Baake's lawyer reported the allegations in the RICO suits to an assistant U.S. attorney named Eric Klumb and told Kravit that he had done so. While visiting the Milwaukee office in connection with another matter, Kravit asked Klumb, with whom Kravit had an acquaintance dating from his days in the Milwaukee office, about the likelihood of a criminal investigation of Van Engel. Klumb told him that the office was not interested in Van Engel's squabble with his business partners

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and that no criminal investigation was pending or likely. Kravit came away with the impression that a criminal investigation of his client was highly unlikely. This conversation took place in August 1987. The following month Kravit negotiated on Van Engel's behalf a settlement of Baake's suit. The terms of the settlement included an agreement by Baake to turn over to Van Engel or Kravit all the evidence, including tape recordings, on which Baake's suit had been based. The evidence was turned over to Kravit, who turned the tape recordings over to Van Engel, who may have destroyed them. Baake retained copies, in violation of the settlement agreement. Kravit made a similar though (as we shall see) seemingly much more generous settlement offer to Zingale on behalf of Van Engel, but Zingale rejected it.

In November 1987, the Milwaukee U.S. Attorney's office received a complaint from a grocery chain that Van Engel had bribed its purchasing agent to buy produce exclusively from him. A criminal investigation was launched under the supervision of assistant U.S. attorney Paul Kanter. The bribed purchasing agent was "turned," and recorded a phone conversation with Van Engel in which the latter offered him $200,000 for his silence. At about this time Kanter discovered the earlier complaint about Van Engel, the one Klumb had received. Shortly afterward Kanter received, apparently from Baake's and Zingale's lawyers, copies of the settlement agreement with Baake and the offer to Zingale. Kanter was disturbed by the provision requiring the turning over of evidence to the defendant, not realizing that this is a common provision in a civil RICO settlement. His concerns were exacerbated when Baake told one of the government investigators that Kravit had told him that he wanted the tapes so that they could be destroyed.

Kanter, perhaps because of lack of guidance from seasoned prosecutors, began to suspect that Kravit might have committed a crime. What crime? Since at the time of the turnover of the tapes to Kravit Van Engel had not even been the subject of a criminal investigation, let alone of a judicial proceeding--certainly none known to Kravit--Kravit could not have been guilty of obstruction of justice even if he had destroyed the tapes on the spot rather than turning them over to Van Engel. The federal obstruction of justice statute, 18 U.S.C. Sec. 1503, is limited to obstruction of a judicial proceeding, and there was no such proceeding either when Kravit received the tapes or when he turned them over to Van Engel. United States v. Neal, 951 F.2d 630, 632 (5th Cir.1992); United States v. Vesich, 724 F.2d 451, 454 (5th Cir.1984). In special circumstances an obstruction of a judicial proceeding might occur time-bomb fashion before the proceeding had begun. In United States v. Lallemand, 989 F.2d 936, 938-39 (7th Cir.1993), we gave the example of a blackmailer who before even committing the crime instructs an accomplice to kill his victim and any other witnesses should the victim report the blackmail attempt. Nothing of the kind is suggested here. Even Van Engel has not been charged with obstruction of justice arising out of the disappearance of the tapes.

Kravit might conceivably have been guilty of violating 18 U.S.C. Sec. 1510(a), which makes it a crime to bribe someone to "obstruct, delay, or prevent the communication of information relating to a violation of any criminal statute of the United States ... to a criminal investigator." Part of the money paid in settlement of Baake's suit was presumably for the turnover of the tapes and other documents, and if the object was to "prevent the communication of [the information contained in them] ... to a criminal investigator," Kravit, if he shared and tried to further the object, might be thought to have aided and abetted a violation of the statute by his client. Some support for this theory might be found in the fact that the settlement offer which Kravit made to Zingale on Van Engel's behalf was for $1.5 million, even though Baake had settled for only $450,000. It is unclear, however, whether the statute is applicable if there is no criminal investigation known to be in progress. United States v. Daly, 842 F.2d 1380, 1390-91 (2d Cir.1988); and compare United States v. Leisure, 844 F.2d 1347, 1364 (8th Cir.1988), with United States v. Carzoli, 447 F.2d 774, 779 (7th Cir.1971). It is also unclear whether either the settlement with

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Baake or the offer to Zingale was excessive in relation to a fair estimate of the expected value of their legal claims, which may not have been identical; whether, when the offers to Baake and Zingale were made, Van Engel or Kravit anticipated that Van Engel was likely to be prosecuted; whether Kravit had an improper purpose in negotiating for what as we have said is a common term in a civil RICO settlement agreement; and whether Kanter or others in the Milwaukee office of the Justice Department had thought through the question of Kravit's potential criminal liability for his role in the settlement negotiations.

Whatever doubts Kanter should have had about such liability, he nevertheless launched a sting operation against attorney Kravit. The first step was to pretend to serve Baake with a grand jury subpoena. Since the settlement agreement required Baake to report to Van Engel or his lawyers any communication with law-enforcement authorities concerning the civil suit (the agreement expressly authorized Baake to make such communications--it was not intended to silence him), the "subpoena" gave Baake a pretext to call Kravit. In the phone conversation, which took place on May 13, 1988, and was recorded at the government's direction, Baake told Kravit that he had received a grand jury subpoena and Kravit responded by suggesting that he hire a lawyer. Kravit said nothing remotely improper in the conversation. Baake made further recorded phone calls to Kravit, none of which turned up evidence that Kravit was or had been obstructing justice, bribing potential witnesses, or otherwise acting improperly. Nevertheless in November 1988 a grand jury subpoena--a real one--was issued to Kravit, directing him to produce all evidence that had been furnished to him pursuant to the settlement agreement with Baake. He produced documents, but no tapes.

In the summer of 1989, with the investigations of both Van Engel and Kravit continuing, Kravit was informed--not by the government but by the lawyer for a witness--that he was the target of a criminal investigation. Until then he had been representing Van Engel in the criminal investigation of the latter. As soon as he discovered that he himself was under investigation, he withdrew and Van Engel retained substitute counsel. After more dithering by the government (including the recusal of the entire Milwaukee office because of Kravit's former employment there), the investigation was finally closed in May 1990, having obtained in two years no evidence of any criminal misconduct. Kravit resumed representing Van Engel, who was finally indicted.

The indictment contained 89 counts. Many of these either were barred by the statute of limitations or were based on criminal statutes that had been enacted after Van Engel's alleged crimes, which stretched back to the early 1970s. The judge dismissed a total of 56 counts on these and other grounds, and the government does not appeal from any of these dismissals. The remaining 33 counts charged Van Engel with having violated the mail fraud statute by defrauding an insurance company and grocery stores, obstructed justice, violated the RICO statute, and committed tax fraud. The obstruction of justice count is based on Van Engel's attempt to bribe the grocery...

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