U.S. v. Olano, s. 87-3128

Citation934 F.2d 1425
Decision Date05 March 1990
Docket Number88-3096 and 88-3295,No. 87-3128,Nos. 87-3128,Nos. 88-3096 and 88-3295,s. 87-3128,87-3128,s. 88-3096 and 88-3295
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Guy W. OLANO, Jr., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Raymond M. GRAY, Defendant-Appellant. . Submitted on the Briefs as to* Argued and Submitted as to
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Guy W. Olano, Jr., pro se.

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

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

Appeal from the United States District Court for the Western District of Washington.

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

REINHARDT, Circuit Judge:

Appellants Olano and Gray appeal their convictions for participating in an elaborate "kickback" scheme involving loans between and among various officers and directors of savings and loan institutions. 1 At trial, the government asserted that Gray and Olano, along with several co-conspirators, including Davy Hilling and David Neubauer, 2 defrauded three thrift institutions by using their positions as directors and officers of their respective institutions to make unauthorized and unsound loans and to grant extensions of credit to each other in exchange for reciprocal loans, extensions of credit, or kickbacks from the loan proceeds. Gray and Olano claim, inter alia, that there is insufficient evidence to sustain their convictions on certain counts. With respect to counts V, VI, and VII against Gray and counts VI and VIII against Olano, we find the evidence insufficient and therefore reverse the appellants' convictions. We reject Gray's contention that the evidence was insufficient as to counts III and IV, and likewise find the evidence sufficient to sustain Olano's convictions on counts III and IX. However, Olano and Gray also assert that the district court violated their right to a jury of twelve persons in allowing the two alternate jurors to retire to the jury room and remain there during jury deliberations. We agree and vacate the convictions of both appellants on all counts not reversed for insufficiency of evidence and remand for a new trial on those counts. 3

I. Facts and Procedural History

Throughout the alleged conspiracy, defendants Hilling, Neubauer, Gray, and Olano each had effective control over three savings and loan institutions: Hilling was chairman of the board of directors of Irving Savings Association in Irving, Texas; Neubauer was operations manager of I.C.R. Mortgage Bankers, Inc., a wholly-owned subsidiary of Irving Savings; Gray was chairman of the board of directors of Home Savings and Loan Association in Seattle, Washington; and Olano was chairman of the board of directors of Alliance Federal Savings and Loan Association in Kenner, Louisiana. These four defendants allegedly caused their respective institutions to transfer millions of dollars to each other by issuing loans and letters of credit. The government contends that, in carrying out the scheme, the defendants frequently bypassed generally--accepted procedural and record-keeping practices, such as documenting the issuance of letters of credit, requiring collateral, and ensuring that the institutions' financial obligations were adequately underwritten.

On December 8, 1986, Gray and Olano were charged in a multi-count indictment in connection with the alleged kickback scheme. Gray was charged in eight of the counts and Olano in seven. Both appellants were charged with conspiracy to commit offenses against the United States, in violation of 18 U.S.C. Sec. 371 (count I); wire fraud, in violation of 18 U.S.C. Sec. 1343 (count II); interstate transportation of stolen property, in violation of 18 U.S.C. Sec. 2314 (count III); misapplication of funds, in violation of 18 U.S.C. Sec. 657 (count IV); false statements, in violation of 18 U.S.C. Sec. 1006 (count VI and VIII). Gray was charged separately on two additional counts of violating Sec. 1006 (counts V and VII). Olano was charged separately with submitting false loan documents for the purpose of influencing Home Savings, in violation of 18 U.S.C. Sec. 1014 (count IX).

After approximately three months of trial, the jury, along with two alternate jurors, retired for deliberations. The jury found Gray guilty of all counts in which he was charged (counts I--VIII). Olano was found not guilty of count II, but was convicted on the remaining counts in which he was charged (counts I, III--VI, VIII, and IX). Gray and Olano were sentenced to a series of three consecutive five-year terms and were ordered to make full restitution to the financial institutions. 4 Gray and Olano were also sentenced to five years probation commencing upon their release from custody.

On May 26, 1987, before the conclusion of trial, the district judge suggested that the two alternate jurors be allowed to remain with the jury during deliberations, unless the parties had an objection. 5 The following day, the court asked defense counsel "whether you want the alternates to go in and not participate." Olano's counsel responded, "We would ask that they not." No more discussion took place that evening. However, on May 28, just before the prosecution's rebuttal argument, the following colloquy took place:

THE COURT: Do I understand that the defendants now--it's hard to keep up with you, counsel. This is sort of a day by day--but that's all right. You do all agree that all fourteen deliberate?

Okay. Do you want me to instruct the two alternates not to participate in deliberation?

MR. KELLOGG [counsel for co-defendant Hilling]: That's what I was on my feet to say. It's my understanding that the conversation was the two alternates go back there instructed that they are not to take part in any fashion in the deliberations.

While it appears that Kellogg spoke on behalf of all defense counsel, Olano's and Gray's counsel did not expressly consent. More important, the record does not show express personal consent from either defendant; nor does it reflect that either defendant understood what was being waived. Indeed, Olano claims that he was not even present for this colloquy because he (unlike the other defendants) was incarcerated at the time and the marshals had not yet returned him to the courtroom after the lunch recess. 6

Informing the jury of the procedural modification, the district judge stated:

[S]ince the law requires that there be a jury of twelve, it is only going to be a jury of twelve. But what we would like to do in this case is have all [fourteen] of you go back so that even the alternates can be there for the deliberations, but according to law, the alternates must not participate in the deliberations. It's going to be hard, but if you are an alternate, we think you should be there because things do happen in the course of lengthy jury deliberations, and if you need to step in, we want you to be able to step in having heard the deliberations. But we are going to ask that you not participate.

The alternate jurors then retired with the jury, which began its deliberations. 7

II. Analysis
A. Sufficiency of the Evidence

Gray contends that the evidence introduced at trial was insufficient to support his convictions on counts III, IV, V, VI, and VII. Olano argues that his convictions on counts III, VIII and IX should be reversed for insufficiency of the evidence. Both Olano and Gray moved for judgments of acquittal under Fed.R.Crim.P. 29. The district court denied their motions. Viewing the evidence in the light most favorable to the prosecution, we must determine whether "any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979) (emphasis in original). See United States v. Washington Water Power Co., 793 F.2d 1079, 1081 (9th Cir.1986). 8

1. Count III: Gray

Gray contends that the evidence was insufficient to support his conviction on Count III for willfully causing the interstate transportation (via wire transfer) of $2.346 million from Home Savings to Alliance Federal, knowing that the money had been taken by fraud, in violation of 18 U.S.C. Sec. 2314. 9

To support a conviction under Sec. 2314, the government must prove beyond a reasonable doubt that Gray (1) transferred or caused to be transferred across state lines (2) monies valued at $5000 or more (3) with the knowledge that such monies had been stolen, converted, or taken by fraud. Gray first argues that there was insufficient evidence to establish his intent to deprive Home Savings of the transferred funds, because, prior to wiring the funds, he had agreed with Shepherd, the president of Home Savings, that the recipient of the funds would be instructed to hold them until Shepherd granted further approval. The record shows that Shepherd gave that instruction but the wire operator inadvertently omitted it. Gray claims that, absent the omission, the funds would never have been disbursed, and that because he did not cause the omission, he did not intend that the money be transferred to Alliance Federal.

To establish that Gray "transferred" the funds in violation of Sec. 2314, the prosecution need only show that Gray caused the money to be transferred, not that he personally transferred it. United States v. Vaccaro, 816 F.2d 443, 455 (9th Cir.1986), cert. denied sub nom. Alvis v. United States, 484 U.S. 914, 108 S.Ct. 262, 98 L.Ed.2d 220 (1987), and cert. denied, 484 U.S. 928, 108 S.Ct. 295, 98 L.Ed.2d 255 (1987); United States v. Gundersen, 518 F.2d 960, 961 (9th Cir.1975) (quoting Pereira v. United States, 347 U.S. 1, 9, 74 S.Ct. 358, 363, 98 L.Ed. 435 (1954))...

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