U.S. v. Daily

Decision Date10 December 1990
Docket Number88-1627 and 89-3333,Nos. 88-1626,s. 88-1626
Citation921 F.2d 994
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Sammy G. DAILY and Frederik A. Figge, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Sheryle L. Jeans, Atty., U.S. Dept. of Justice, Kansas City, Mo. (Benjamin L. Burgess, U.S. Atty., D. Kan., Kansas City, Mo., and Michael J. Dittoe, Atty., U.S. Dept. of Justice, with her on the briefs), for plaintiff-appellee.

Steven M. Dickson, Dickson & Pope, P.A., Topeka, Kan., for defendants-appellants.

Before HOLLOWAY, Chief Judge, EBEL, Circuit Judge, and SEAY *, Chief District Judge.

HOLLOWAY, Chief Judge.

Defendants-appellants Sammy Daily and Frederik Figge were convicted on one count each of conspiring, in violation of 18 U.S.C. Sec. 371, to commit offenses under 18 U.S.C. Secs. 1001 and 1343. Daily and Figge make several claims of error. In view of our ultimate disposition of these appeals, we only deem it necessary or appropriate to address eight contentions here: (1) whether the trial court lacked subject matter jurisdiction to impose judgment on Daily and Figge; (2) whether the indictment insufficiently charged the offense at issue, or was improperly broadened by the trial court's instructions; (3) whether the trial court erred in failing to hold an evidentiary hearing as to the validity of a search warrant; (4) whether the government improperly failed to provide Daily and Figge with exculpatory evidence; (5) whether the trial court erred in instructing the jury as to materiality under 18 U.S.C. Secs. 1001 and 1343; (6) whether there was a fatal variance between the indictment and the proof as to the alleged existence of multiple conspiracies, and whether the trial court erred in failing to give an express multiple-conspiracy instruction; (7) whether the trial court erred in failing to instruct the jury with respect to substantial character evidence addressed by both defendants; and (8) whether there was sufficient evidence to support the defendants' conspiracy convictions. Due to prejudicial error on issue (7), we must reverse and remand for a new trial.

I. BACKGROUND
A. Facts

The facts underlying these appeals are complicated. We briefly summarize them here, and address particular facts in greater detail in disposing of Daily and Figge's claims of error.

Essentially, the government alleges that Daily and Figge (as well as others) 1 conspired to defraud the Coronado Federal Savings and Loan (CFSL) and the Indian Springs State Bank (ISSB), both financial According to the government, this plan required the participation of CD owners (generally credit unions), limited partnership investors, and financial institutions (ISSB and CFSL). Credit unions were persuaded to purchase CDs from ISSB and CFSL through First United Fund (FUF), a money brokerage firm owned and operated by Mario Renda, an alleged co-conspirator. In what were dubbed "special deals" or "Joe Davis deals," FUF account executives would inform credit unions that financial institutions like ISSB and CFSL were paying a higher rate of interest than was actually the case. When a credit union would notify FUF that a financial institution was not paying the expected interest rate, FUF would send out a standard letter of apology, and would make up the difference to the credit union. In turn, FUF would collect the interest-rate differential from third parties who were told that they were paying a fee for FUF's brokerage services.

institutions in Kansas, by recruiting limited partners for a number of land investment partnerships, and by having those limited partners apply for loans from ISSB or CFSL. ISSB and CFSL loaned the money with the understanding that they would receive funds equal to double the loan amounts through purchases of certificates of deposit (CDs). The loan proceeds went into partnership accounts, and allegedly were then used for the personal benefit of the co-conspirators.

Daily and Figge were actively involved in the recruitment of limited partner investors. In connection with their recruitment activities, however, Daily and Figge allegedly made a number of false statements. In order to participate in the real estate venture, investors had to apply for loans from ISSB or CFSL and deposit the proceeds in one of the limited partnership accounts. To induce their participation, among other things, Daily and Figge allegedly told the investors that the applications for the loans were a mere formality and would not be scrutinized by the bank and that all debts need not be listed on the applications; that the partnerships would make all the loan payments and that investors would have no personal liability; that condominiums, which could be sold in short order, would be transferred into one of the partnerships; that there were adequate reserves set aside to offset any negative cash flows; and that investors would not be required to make any further contributions. According to the government, none of these promises was given truthfully.

ISSB and CFSL were induced to make the loans by assurances that investors were qualified to borrow. However, according to the government, loan applications contained false information. In some instances, investors were told by Daily or Figge (or an alleged co-conspirator, Franklin Winkler) to beef up their applications by adding false statements. In other cases, Daily or Figge altered or completed the applications such that they evidenced material falsehoods without the investors' knowledge. In this regard, Daily and Figge are said to have routinely asked investors to fill out and deliver to them draft loan applications and signed, blank copies.

The government alleges that much of the money gained from this scheme was retained by Daily and Figge for their personal use and benefit. For the most part, says the government, no payments were ever made on these loans, and in fact the partnerships had the effect of solving defendants' cash flow problems on properties without divesting them of ownership of the properties. The government alleges that properties were not transferred to the limited partnership as promised, and therefore, the partnerships had no assets. Moreover, the properties were fully pledged as collateral on another obligation and were eventually foreclosed upon.

For their part, Daily and Figge contend that they were facilitating legitimate land investment deals. They maintain that the plan fell apart because the Federal Deposit Insurance Corporation (FDIC) and the Federal Savings and Loan Deposit Insurance Corporation (FSLIC) unexpectedly gave special scrutiny to the loans because they were associated with brokered deposits, and because many of the loans were "out of territory" (i.e., many of the partners were from Hawaii). Subsequently, they claim that ISSB called all the loans even though payments on the loans were current. They assert that they refused to pay on the loans because of previous agreements

                with ISSB, and that "[t]he disinformation from the FDIC and the bank's actions was severe and ruined Daily's real estate firm, affecting his [and Figge's] ability to perform."    Brief of Appellants at 4-5 (emphasis in original)
                
B. Procedural History

Daily, Figge, and three others were indicted by a grand jury on a 34-count indictment. These counts mostly pertained to wire fraud (18 U.S.C. Sec. 1343). Count 30 charged Daily and Figge with conspiring, in violation of 18 U.S.C. Sec. 371, to commit wire fraud, and to submit false statements as to matters within the jurisdiction of a federal agency (18 U.S.C. Sec. 1001). Neither Daily nor Figge was charged with a substantive false statement violation under Sec. 1001. However, Daily was separately charged in another count with violating 18 U.S.C. Secs. 1014 and 2, making false statements to influence a federally-insured bank.

The case was tried before a jury over a period spanning approximately two months. The jury returned guilty verdicts against Daily and Figge, but only as to the conspiracy count (Count 30). Daily was sentenced to five years' imprisonment and, Figge was sentenced to three years' imprisonment. Both were ordered to pay a $10,000 fine and a $50 assessment to the Crime Victims Fund. In Numbers 89-1626 and 89-1627, respectively, Daily and Figge timely appealed their convictions and sentences. 2

II. DISCUSSION
A. Jurisdiction

In a pro se supplementary brief, Daily and Figge first contend that their convictions cannot stand because the government failed to establish that they committed an offense within the "territorial jurisdiction of the United States." 18 U.S.C. Sec. 7. In this regard, they assert that the geographical area referred to in the quoted phrase is more limited than the geographical area commonly thought of as constituting the United States. It was thus allegedly incumbent on the government in the instant case to prove "United States ownership of the property in question [or] a State cession of jurisdiction." Supplementary Pro Se Brief of Defendants-Appellants at 7.

This argument, however, is wholly without merit. Precisely the opposite is true: "The federal government has territorial jurisdiction over certain conduct which occurs outside of the fifty states." 2 W. LaFave & J. Israel, Criminal Procedure Sec. 16.2, at 343 (1984). Accordingly, we conclude that the government had no obligation to make a jurisdictional showing as asserted by Daily and Figge (i.e., United States ownership or State cession), and the criminal charges were properly before the district court.

B. Sufficiency of the Indictment

Daily and Figge make several arguments that challenge the indictment as insufficient. Generally, they argue first that Count 30 fails to state an offense and, second, that the district court improperly broadened the indictment through the use of jury instructions. We reject both contentions.

1. Statement of the Offense

Daily and Figge...

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