Keating v. Office of Thrift Supervision

• Decision Date: 01 November 1994
• Docket Number: No. 93-70902,93-70902
• Citation: 45 F.3d 322
• Parties: Charles H. KEATING, Jr., Petitioner, v. OFFICE OF THRIFT SUPERVISION, Respondent.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 322

45 F.3d 322

Charles H. KEATING, Jr., Petitioner, v. OFFICE OF THRIFT SUPERVISION, Respondent.

No. 93-70902.

United States Court of Appeals, Ninth Circuit.

Submitted Nov. 1, 1994 ^*.

Decided Jan. 18, 1995.

Charles H. Keating, Jr., Scottsdale, AZ, for petitioner.

Richard L. Rennert, Office of Thrift Supervision, Washington, DC, for respondent.

Petition for Review of a Decision of the Office of Thrift Supervision

Before: WIGGINS, KOZINSKI, and THOMPSON, Circuit Judges.

WIGGINS, Circuit Judge:

BACKGROUND

On August 9, 1990, the Office of Thrift Supervision ("OTS") filed a notice of charges against Petitioner Charles Keating, Jr. and other defendants. Subsequently, all defendants but Keating settled the cases against them. Keating's hearing was conducted before Paul Clerman, an Administrative Law Judge ("ALJ") appointed for this proceeding by Timothy Ryan, who was then Director of the OTS. The OTS's final order banned Keating from the federally insured banking industry and directed him to pay $36,398,738.76 in restitution to Lincoln Savings & Loan in receivership.

Keating appealed to this court, seeking to have the OTS's order vacated and the case remanded for a new hearing. This court has jurisdiction under 12 U.S.C. Sec. 1818(h)(2) to hear the appeal. Keating appeals on three grounds, none of which challenges the substance of the agency's findings and conclusions. First, Keating appeals the ALJ's November 15, 1990 order denying Keating's request to stay the OTS enforcement action pending the resolution of all criminal proceedings against him. ¹ Second, Keating alleges error in former OTS Director Timothy Ryan's May 11, 1991, refusal to recuse himself for alleged bias. Third, Keating argues that he was denied due process by Ryan's exercise of combined investigatory, prosecutorial, and adjudicatory functions. We consider each ground for appeal in turn, and we affirm.

DISCUSSION

I. REFUSAL TO STAY THE PROCEEDING

Keating claims his due process rights were violated by OTS's refusal to stay the civil proceeding until the conclusion of state and federal criminal proceedings, because (1) he was afforded inadequate preparation time to defend the OTS proceeding, and (2) the pending criminal proceedings forced him to invoke his Fifth Amendment privilege during the OTS hearing, depriving him of an opportunity to testify on his own behalf.

The Constitution does not ordinarily require a stay of civil proceedings pending the outcome of criminal proceedings. Federal Sav. & Loan Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir.1989); Securities & Exchange Comm'n v. Dresser Indus., 628 F.2d 1368, 1375 (D.C.Cir.), cert. denied, 449 U.S. 993, 101 S.Ct. 529, 66 L.Ed.2d 289 (1980). "In the absence of substantial prejudice to the rights of the parties involved, [simultaneous] parallel [civil and criminal] proceedings are unobjectionable under our jurisprudence." Dresser, 628 F.2d at 1374. "Nevertheless, a court may decide in its discretion to stay civil proceedings ... 'when the interests of justice seem[ ] to require such action.' " Id. at 1375 (quoting United States v. Kordel, 397 U.S. 1, 12 n. 27, 90 S.Ct. 763, 769 n. 27, 25 L.Ed.2d 1 (1970)).

The decision whether to stay civil proceedings in the face of a parallel criminal proceeding should be made "in light of the particular circumstances and competing interests involved in the case." Molinaro, 889 F.2d at 902. This means the decisionmaker should consider "the extent to which the defendant's fifth amendment rights are implicated." Id. In addition, the decisionmaker should generally consider the following factors:

(1) the interest of the plaintiffs in proceeding expeditiously with this litigation or any particular aspect of it, and the potential prejudice to plaintiffs of a delay; (2) the burden which any particular aspect of the proceedings may impose on defendants; (3) the convenience of the court in the management of its cases, and the efficient use of judicial resources; (4) the interests of persons not parties to the civil litigation; and (5) the interest of the public in the pending civil and criminal litigation. Id. at 903.

Keating contends that the ALJ's refusal to postpone the administrative proceeding left him with inadequate time to mount a defense because the criminal trials demanded all of his attention. Although both the criminal trials and the OTS proceeding involved potentially overwhelming quantities of documentary evidence, the ALJ found that Keating had adequate time to prepare for the OTS hearing. He also concluded that any burden on Keating was far outweighed by the public interest in a speedy resolution of the case. Both conclusions are supported by the record.

The OTS hearing began eleven months after the notice of charges issued. The notice issued on August 9, 1990. The hearing took place in Los Angeles from July 1 to 3 and July 8 to 12, 1991. On July 12 the OTS hearing was suspended for nine months. The state trial began on Aug. 4, 1991, resulting in conviction on Dec. 4, 1991. Keating was then indicted on federal charges on Dec. 12, 1991. On March 24, 1992, two of the four OTS charges were severed because they concerned the transactions on which the federal indictment was based. The OTS hearing on the remaining two charges resumed in Phoenix, Arizona on April 27, 1992. The hearing concluded on May 1, 1992. Keating's federal criminal trial began six months later, on November 2, 1992.

In sum, Keating had eleven months to prepare for the first segment of the administrative hearing. The OTS proceeding was then adjourned for nine months, during which Keating's state trial and sentencing took place. ² When the hearing resumed, the state trial itself had been over for more than four months. The federal trial did not commence until six months after the completion of the OTS proceeding. The ALJ was therefore justified in finding that Keating had ample time to prepare his defense in the OTS proceeding and that the decision not to stay the hearing did not unduly compromise Keating's due process rights.

Keating also contends that the OTS proceeding should have been stayed until after the conclusion of the criminal trials because the pending trials forced him to assert his Fifth Amendment privilege in the OTS proceeding. His argument is unpersuasive.

Keating did not have an opportunity to invoke his Fifth Amendment privilege in the OTS hearing before the hiatus, during which the state trial and federal indictment took place. After the federal indictment, the OTS successfully moved to sever two administrative counts that overlapped with the federal indictment. The OTS claims that the remaining two counts were unrelated to the federal charges. Keating, on the other hand, claims that there was still significant overlap between the subject matter of the remaining administrative counts and the federal criminal trial, which made it necessary to invoke his Fifth Amendment privilege. When the hearing resumed, Keating made an appearance to waive his rights to attend the hearing, to have his attorneys present, to cross-examine witnesses, to testify, to present evidence, or otherwise to defend the proceeding, and he declared that he would assert his Fifth Amendment privilege against self-incrimination in response to any questions by OTS counsel. He did, in fact, assert the privilege when asked about certain transactions.

We conclude that any remaining overlap between the OTS and criminal proceedings In deciding whether to proceed with the hearing, the extent to which the defendant's Fifth Amendment rights are implicated is a significant factor for the ALJ to consider, but it is only one consideration to be weighed against others. Molinaro, 889 F.2d at 902. The ALJ's discussion of the various considerations was exhaustive, and despite the potential implication of Keating's Fifth Amendment rights, he did not abuse his discretion in deciding that the balance favored proceeding with the hearing.

did not make the ALJ's refusal to stay the OTS proceeding an abuse of discretion. A defendant has no absolute right not to be forced to choose between testifying in a civil matter and asserting his Fifth Amendment privilege. Not only is it permissible to conduct a civil proceeding at the same time as a related criminal proceeding, even if that necessitates invocation of the Fifth Amendment privilege, but it is even permissible for the trier of fact to draw adverse inferences from the invocation of the Fifth Amendment in a civil proceeding. Baxter v. Palmigiano, 425 U.S. 308, 318, 96 S.Ct. 1551, 1557, 47 L.Ed.2d 810 (1976).

In contrast to Keating's interests, which were not overly burdened by proceeding with the hearing, the public's interest in a speedy resolution of the controversy and the OTS' concern for efficient administration would have been unnecessarily impaired had the proceeding been stayed. Moreover, in light of the inordinate amount of media attention given to the case, any delay would have been detrimental to public confidence in the enforcement scheme for thrift institutions.

In highly publicized cases, such as the one at hand, judicial and quasi-judicial decisionmakers need to be especially careful that undue consideration is not given a proceeding's impact on the public. Governmental entities are frequently aware of the need to reassure the public that they are taking prompt action in response to a crisis. In such high visibility situations, it is especially necessary to guard the rights of defendants, and concern for the public deterrence value of an enforcement proceeding must not be allowed to override the individual defendant's due process rights. However, in light of the finding that Keating had sufficient preparation time, we are confident that Keating's due process rights were adequately protected, and it was not an abuse of...