U.S. v. Olano

• Decision Date: 09 August 1995
• Docket Number: Nos. 87-3128,88-3096 and 88-3295,s. 87-3128
• Citation: 62 F.3d 1180
• Parties: 42 Fed. R. Evid. Serv. 1089, 95 Cal. Daily Op. Serv. 6281, 95 Daily Journal D.A.R. 10,701 UNITED STATES of America, Plaintiff-Appellee, v. Guy W. OLANO, Jr., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Raymond M. GRAY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1180

62 F.3d 1180

42 Fed. R. Evid. Serv. 1089, 95 Cal. Daily Op.

Serv. 6281,

95 Daily Journal D.A.R. 10,701

UNITED STATES of America, Plaintiff-Appellee, v. Guy W. OLANO, Jr., Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Raymond M. GRAY, Defendant-Appellant.

Nos. 87-3128, 88-3096 and 88-3295.

United States Court of Appeals, Ninth Circuit.

Aug. 9, 1995.

Guy W. Olano, Jr., Pensacola, FL, pro se.

John R. Muenster, Mestel & Muenster, Seattle, WA, William J. Genego, University of Southern California, Law Center, Los Angeles, CA, for defendant-appellant Raymond M. Gray.

Thomas C. Wales, Asst. U.S. Atty., Robert H. Westinghouse, Asst. U.S. Atty., Seattle, WA, for plaintiff-appellee.

On Remand from the United States Supreme Court.

Before: WRIGHT, REINHARDT, and O'SCANNLAIN, Circuit Judges.

Opinion by Judge O'SCANNLAIN; Dissent by Judge REINHARDT.

O'SCANNLAIN, Circuit Judge:

The Supreme Court having decided that the presence of alternate jurors during deliberations was not erroneous, we now decide, among myriad remaining issues, whether a juror's stipulated absence from a half-day of trial testimony is permissible.

I

Olano and Gray participated in a complicated kickback scheme in which individuals abused their control of various financial institutions to grant unauthorized loans and extensions of credit to each other. The government brought various bank fraud charges against the two men in a multi-count indictment. A jury found Olano guilty of six counts of the indictment, and Gray guilty of eight.

On appeal, we reversed Olano's convictions under two of these counts, and Gray's convictions under three, for lack of sufficient evidence. United States v. Olano, 934 F.2d 1425, 1428 (9th Cir.1991) (Olano I ). We also vacated both Olano's and Gray's convictions under all remaining counts for plain error because alternate jurors were present with the jury during deliberations. Id. The Supreme Court granted certiorari and reversed this portion of our decision, holding that permitting the presence of the alternate jurors did not constitute plain error. United States v. Olano, --- U.S. ----, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (Olano II ).

On remand, we must address numerous arguments raised by Olano and Gray attacking the remaining convictions for which there was sufficient evidence. ¹ Count I charged Olano and Gray with conspiracy to commit eight specific offenses against the United States in violation of 18 U.S.C. Sec. 371. Count II charged Gray with wire fraud in violation of 18 U.S.C. Sec. 1343. Count III charged Olano and Gray with interstate transportation of stolen property in violation of 18 U.S.C. Sec. 2314. Count IV charged Olano and Gray with misapplication of funds in violation of 18 U.S.C. Sec. 657. Count VIII charged Gray with making false statements in violation of 18 U.S.C. Sec. 1006. Finally, count IX charged Olano with submitting false loan documents in violation of 18 U.S.C. Sec. 1014.

Olano and Gray were tried with Davy Hilling, David Neubauer, among others. ² These four men were directors and officers of financial institutions. Olano was chairman of the board of directors of Alliance Federal Savings and Loan Association of Kenner, Louisiana ("Alliance Federal"). He also had his own law office. Gray was chairman of the board of Home Savings and Loan Association in Seattle, Washington ("Home Savings"). Hilling was chairman of the board of Irving Savings Association in Irving, Texas ("Irving Savings"), and Neubauer was operations manager of I.C.R. Mortgage Bankers, Inc. ("ICR"), a wholly-owned subsidiary of Irving Savings.

The government asserts that these four individuals caused their institutions to transfer millions of dollars to each other through loans and letters of credit. According to the government, the defendants submitted false statements and bypassed generally-accepted procedural and record-keeping practices to ensure that these loans and issuances of credit were approved.

The precursor to the alleged conspiracy was Hilling and Neubauer's acquisition of the parent corporation of Irving Savings. This purchase, itself fraudulent, was heavily financed and it encumbered Hilling and Neubauer with substantial debt.

Soon thereafter, the two men were introduced to Gray. Like Hilling and Neubauer, Gray wanted to purchase a number of business concerns but had little available cash or collateral to do so. The three men's mutual shortage of funds ultimately led them to cooperate in a scheme in which they caused the financial institutions that they controlled to lend each other money. Through undercollateralized loans and letters of credit issued out of Irving Savings, Hilling and Neubauer helped to fund Gray's acquisitions of, among other things, a portion of a startup airline and the Home Savings savings and loan. Gray, in turn, gave Hilling and Neubauer part of the proceeds from these loans and commitment letters to use for payments on their Irving Savings debt.

Olano shared Gray's, Hilling's and Neubauer's need for funds. Olano owned a condominium complex (the "Dauphine Condominiums") in Louisiana and was under pressure from creditors to pay off outstanding debt on the property. After meeting Gray, Olano found a potential buyer of the property--Jerome McCuin. McCuin, however, needed a loan to make the purchase. To help Olano, Gray caused Home Savings to issue an undercollateralized loan to McCuin. It is Olano's and Gray's fraudulent activity with respect to this loan that underlies the substantive counts for which they were convicted.

Federal investigations ultimately resulted in charges of a number of counts of bank-related fraud as well as participation in a single conspiracy. The jury found Olano and Gray guilty on counts that are described above as well as others which we have reversed in Olano I. The jury also returned guilty verdicts against Hilling and Neubauer on certain counts which convictions were later reversed in separate appeals. See United States v. Hilling, 891 F.2d 205 (9th Cir.1988).

II

Olano raises a number of trial procedure claims alleging violations of his Fifth and Sixth Amendment rights. We address each in its turn.

A

On the twenty-eighth day of trial, juror Soleen became ill. The juror managed to sit through the morning session of testimony but informed the court that he could not continue through the afternoon. The district court notified counsel of this problem and hinted that Soleen could be replaced by an alternate juror. After conferring, the attorneys requested that Soleen be excused for the remainder of the day. They asked the court to check on Soleen the following morning to see if he had recovered. If he were well enough to attend the trial at that time, the attorneys suggested, the court could provide him with a transcript of the half-day's testimony that he missed.

The district court implemented this procedure after all counsel agreed to it. Soleen missed the afternoon examination of government witness Carole Lawrence, who had undergone direct examination in the morning, and a portion of government witness Kenneth Kuebel's testimony. On the next day, Soleen was well enough to continue sitting, and he ultimately was one of the jurors who returned verdicts against Olano and Gray.

Olano contends for the first time on appeal that Soleen's absence violated his Sixth Amendment right to trial by an impartial jury. According to Olano, the unbroken presence of all jurors during live testimony is inherent in this right. Since Soleen missed a portion of live testimony, Olano asserts that the district court committed reversible error.

Because Olano did not object to Soleen's absence at trial, we review for plain error. Fed.R.Crim.P. 52(b). The Supreme Court clarified the meaning of "plain error" review in its review of Olano I. According to the Court, a court of appeals has the authority to reverse a conviction under Federal Rule of Criminal Procedure 52(b) when (1) there was an error, (2) the error was plain, and (3) the error affected a defendant's substantial rights. Olano II, --- U.S. at ---- - ---- 113 S.Ct. at 1776-79. Even if each of these conditions is satisfied and an appellate court has the authority to reverse, it also retains the discretion whether to do so. A court of appeals "should not exercise that discretion unless [a plain error] seriously affects the fairness, integrity or public reputation of judicial proceedings." Id. at ----, 113 S.Ct. at 1776 (internal quotation omitted). Thus, more than plain error affecting substantive rights must exist for the court to reverse. Id. at ----, 113 S.Ct. at 1779.

We agree with Olano that the district court's decision to proceed without juror Soleen meets the first two requirements of Rule 52(b). An "error" under Rule 52(b) is any deviation from a legal rule, and an error is "plain" if it is " 'clear' or, equivalently, 'obvious.' " Olano II, --- U.S. at ----, 113 S.Ct. at 1779. The district court's decision to excuse Soleen for an afternoon meets these standards. The Federal Rules of Criminal Procedure nowhere authorize the novel tinkering with a jury that occurred in Olano's and Gray's trial. All involved should have known that they were operating outside of the range of options available for modifying the standard panel of twelve full-time jurors. See Fed.R.Crim.P. 23.

Whether the district court's error affected Olano's substantial rights presents a more difficult question. The Court stated in Olano II that an error affects a defendant's substantial rights when it prejudices him or her in such a manner that it "affect[s] the outcome of the District Court proceedings." --- U.S. at ----, 113 S.Ct. at 1779. In review for plain error, "[i]t is the defendant rather than the Government who bears the burden of persuasion with respect to prejudice." Id. at ----, 113 S.Ct. at 1778.

Olano has not demonstrated actual prejudice from Soleen's absence. In particular, he...