U.S. v. Conners

• Decision Date: 24 January 1990
• Docket Number: No. 89-5096,89-5096
• Citation: 894 F.2d 987
• Parties: 30 Fed. R. Evid. Serv. 260 UNITED STATES of America, Appellee, v. Daniel K. CONNERS, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 987

894 F.2d 987

30 Fed. R. Evid. Serv. 260

UNITED STATES of America, Appellee, v. Daniel K. CONNERS, Appellant.

No. 89-5096.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 11, 1989.

Decided Jan. 24, 1990.

John W. Lundquist, Minneapolis, Minn., for appellant.

Franklin L. Noel, Asst. U.S. Atty., Minneapolis, Minn., for appellee.

Before JOHN R. GIBSON and WOLLMAN, Circuit Judges, and BRIGHT, Senior Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Daniel K. Conners appeals from his convictions for three counts of wire fraud under 18 U.S.C. Sec. 1343 (1982), four counts of embezzlement of bank funds in violation of 18 U.S.C. Sec. 656 (1982), and four counts of making false entries in bank records in violation of 18 U.S.C. Sec. 1005 (1982). Conners had acquired control of the Peoples State Bank of Mazeppa and the government charged that his fraudulent activities caused the bank to lose $5.8 million and led to the bank's insolvency, which required the Federal Deposit Insurance Corporation to cover the loss. On appeal, Conners argues that the district court ¹ erred by not properly instructing the jury on his good faith defense and his theory of defense, not ordering sequestration of a government witness, and not excluding certain evidence of other crimes. He claims that the court denied him due process by limiting his cross-examination of government witnesses, and that he was prejudiced by the jury's exposure to extraneous information. Finally, Conners asserts that the evidence was insufficient to sustain his convictions, and that charging him with both embezzlement and making false entries was duplicitous. For the reasons discussed below, we affirm the judgment of the district court.

During the mid-1980's, Conners was actively involved in numerous business ventures. He worked as a stock broker while searching for businesses he could buy on a leveraged basis. He was able to acquire the Kloster-Madsen Construction Company in Bloomington, Minnesota, as well as many other businesses. In describing his business activities, Conners states in his brief that he "moved rapidly from one project to another with great enthusiasm but scant attention to detail and paperwork." (Appellant's Brief at 3).

Conners became interested in buying and selling loan packages at a profit and believed that owning a financial institution would aid him in this endeavor. He hired others to identify potential purchases and, after negotiations to purchase one bank had failed, he succeeded in becoming the majority shareholder of the Mazeppa Bank. In his brief, Conners admits that, at that point, he "had no banking experience whatsoever but intended to learn as he went along." (Appellant's Brief at 4).

After taking over the Mazeppa Bank, Conners engaged in a series of complex financial transactions which, he claims, were supposed to increase the funds held on deposit in order to lend those funds at profitable interest rates.

Conners first used deposit brokers to increase the funds held on deposit at the Mazeppa Bank and then arranged for the bank to buy loan packages from a corporation owned by Conners, American Guaranty Title and Escrow Company, in five transactions. At Conners' request, James Hightower, a Texas businessman, had agreed to locate and purchase pools of loans held by Texas banks and then sell these loan packages to American Guaranty. Toward this end, Hightower purchased loans for five cents on the dollar from Texas banks. The Texas banks had already charged off most of these loans as uncollectible. American Guaranty then resold the loan packages to the Mazeppa Bank for 100 cents on the dollar.

American Guaranty used the money raised from sale of the loan packages to invest in real estate and to make loans to Conners' businesses, primarily Kloster-Madsen. Conners also embezzled funds to repay debts he had incurred by borrowing against a warehouse line of credit at First National Bank of Minneapolis. In addition, Mazeppa Bank funds were used to buy the "Isle of Happy Days" Resort in Cedar Lake, Wisconsin. There is conflicting evidence as to whether the resort was bought for Conners' personal use or as a business acquisition.

The FDIC audited the Mazeppa Bank, and its examiners criticized the transactions between the bank and American Guaranty, particularly since the loan files were not on bank premises. In response, Conners agreed to arrange for the repurchase of the loan packages from the bank. His plan was to have another bank which he owned, the Greeley Industrial Bank of Greeley, Colorado, buy the loan packages from the Mazeppa Bank. He intended to accomplish this by using a deposit broker to increase deposits at the Mazeppa Bank and then transferring that money to the Greeley bank to fund the purchases.

When Conners realized that his plan was doomed to failure because the Mazeppa Bank would have a large depository liability and no significant income-producing assets, he disclosed his activities to the Minnesota Department of Commerce and resigned from his office as president of the Mazeppa Bank. He was subsequently charged with wire fraud, embezzlement, and making false entries in bank records.

At trial, the essence of Conners' defense was that his actions were in good faith and that he had no intent to defraud. After a two week trial, Conners was convicted on all eleven counts, and sentenced to eight years imprisonment, followed by four years of probation. A special assessment was imposed upon Conners pursuant to 18 U.S.C. Sec. 3013 (Supp. V 1987).

I.

Conners argues that the district court erred by failing to properly instruct the jury both on his defense of good faith and on his theory of the defense. ² He argues that this had a critical impact on the trial because his entire defense was built upon his good faith beliefs and intentions, and also because good faith is a complete defense to a charge of wire or mail fraud. United States v. Casperson, 773 F.2d 216, 223 (8th Cir.1985); United States v. Sherer, 653 F.2d 334, 337 (8th Cir.), cert. denied, 454 U.S. 1034, 102 S.Ct. 573, 70 L.Ed.2d 478 (1981).

He asserts that the court should have accepted his theory of defense instructions since he made a timely request, the evidence supported the instructions, and the instructions correctly stated the law. United States v. Montgomery, 819 F.2d 847, 851-52 (8th Cir.1987). Conners insists that the court's rejection constitutes reversible error because the instruction he offered referred to his good faith belief in his plan to refinance the bank, the value of the loan packages, and the accuracy of the records, whereas the instruction actually given amounted to nothing more than a broad denial of the charges.

The record makes clear that the court instructed the jury in substantial detail on the relevant law and defined terms central to Conners' good faith defense, such as "specific intent," "willfully," "intent to defraud," "embezzle," "false entry," and "false or fraudulent representation." (Tr. 1171-84). The jury was also informed that "more than mere maladministration or poor judgment" was required to convict Conners. (Tr. 1171).

The court gave separate theory of defense instructions on the wire fraud charge and on the embezzlement and false entry charges. ³ As to the wire fraud, the court's charge to the jury included the statement: "It is [Conners'] position that he transferred funds in good faith to the ... Greeley Industrial Bank, so that Greeley could acquire loan files he states were held by the Peoples State Bank of Mazeppa." (Tr. 1177-78). Regarding the embezzlement and false entry charges, the court instructed, in part, that "[t]he defendant maintains he acted in good faith and without an intent to deceive or defraud when these transactions took place." (Tr. 1184).

The instructions given by the court stated the law accurately and incorporated the substance of Conners' defense. Conners was not entitled to more. The court was not required to instruct the jury in the exact language requested by Conners. Casperson, 773 F.2d at 223; United States v. Brown, 584 F.2d 252, 259 (8th Cir.1978), cert. denied, 440 U.S. 910, 99 S.Ct. 1220, 59 L.Ed.2d 458 (1979).

We are not faced with a situation such as existed in United States v. Casperson, cited by Conners in support of his argument. In Casperson, the court failed to instruct the jury on either the defense of good faith or on the defendant's theory of defense. 773 F.2d at 222. That is not the case here. Conners is objecting to the words actually used by the court and not to failure to give an instruction. When we evaluate "the adequacy of [the] trial court's instructions by considering them as a whole," id. at 223, we are satisfied that there was no error.

II.

Conners asserts that the district court committed reversible error by failing to order that a certain government witness be sequestered, as required by Rule 615 of the Federal Rules of Evidence.

At trial, the government was represented at counsel's table by an FBI case agent and by an FDIC examiner, William Horlitz. Horlitz was also the government's final witness, and he testified about the FDIC's investigation of Conners. When Conners objected, under Rule 615, to Horlitz's presence during the trial, the court initially ordered that Horlitz be sequestered. The government sought permission for Horlitz to remain in the courtroom on the ground that his presence was essential to presentation of its case, and the court reversed its earlier ruling and allowed Horlitz to remain. On appeal, Conners argues that the court erred by allowing Horlitz to sit at counsel's table throughout the trial and then to testify on behalf of the government.

The district court's ruling is reversible only upon a clear showing of abuse of discretion. United States v. Faul, 748 F.2d 1204, 1221 (8th Cir.1984), cert. denied, 472 U.S. 1027, 105 S.Ct. 3500, 87 L.Ed.2d 632 (1985); United States v. Alvarado, 647 F.2d 537,...