U.S. v. Best, s. 87-2456

• Decision Date: 05 August 1991
• Docket Number: Nos. 87-2456,87-2457 and 87-2458,s. 87-2456
• Citation: 939 F.2d 425
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. John C. BEST, Gregory J. Bewick and Paul F. Conarty, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 425

939 F.2d 425

UNITED STATES of America, Plaintiff-Appellee, v. John C. BEST, Gregory J. Bewick and Paul F. Conarty,

Defendants-Appellants.

Nos. 87-2456, 87-2457 and 87-2458.

United States Court of Appeals,

Seventh Circuit.

Argued April 5, 1990.

Reargued En Banc June 11, 1991.

Decided Aug. 5, 1991.

Anton R. Valukas, U.S. Atty., Jeanne M. Witherspoon, Asst. U.S. Atty., Office of U.S. Atty., Crim. Div., David J. Stetler, Victoria J. Peters, Asst. U.S. Attys., Office of U.S. Atty., Crim. Receiving, Appellate Div., Chicago, Ill., for plaintiff-appellee.

James R. Ferguson, Sonnenschein, Nath & Rosenthal, James S. Montana, Jr., Susan G. Feibus, Sidney Z. Karasik, Lydon & Griffin, George P. Lynch, and Gregory C. Jones, Irving C. Faber, Grippo & Elden, M. Jacqueline Walther (argued), Kielian & Walther, Mary Ellen Dienes (argued), Chicago, Ill., for defendants-appellants.

James R. Ferguson, Sonnenschein, Nath & Rosenthal, Gregory C. Jones, Irving C. Faber, Grippo & Elden, Chicago, Ill., Dennis A. Rendleman, Ill. State Bar Ass'n, Staff Counsel, Springfield, Ill., for amicus curiae Susan Bogart.

Before BAUER, Chief Judge, CUMMINGS, WOOD, Jr., CUDAHY, POSNER, COFFEY, FLAUM, EASTERBROOK, RIPPLE, MANION and KANNE, Circuit Judges.

BAUER, Chief Judge.

In this en banc review, we must decide whether the defendants were deprived of a fair trial due to the presence of binders containing certain government exhibits in the jury room during deliberations. In our prior opinion, see United States v. Best, 913 F.2d 1179 (7th Cir.1990), vacated, 924 F.2d 646 (7th Cir.1991), a panel of this court held that the presence of the binders during jury deliberations was jury tampering that constituted reversible error. After rehearing the case en banc, we now hold that the presence of the binders in the jury room was not error, and, therefore, affirm the defendants' convictions.

I.

Having recited the complex facts of this case in the earlier opinion, we need only glean from that recitation here. See Best, 913 F.2d at 1181. John C. Best, Gregory J. Bewick, and Paul F. Conarty were indicted on thirty-five counts of mail fraud, misapplication of bank funds, bank fraud, and related crimes committed in the course of the failure of the American Heritage Savings and Loan Association ("American"), a federally insured institution of which Best, Bewick, and Conarty were officers. Best was its president and chaired its Board of Directors, Bewick its executive vice-president and managing officer, and Conarty its in-house counsel.

American had been experiencing financial difficulties since 1981, when the State of Illinois Commissioner of Savings and Loans and the Federal Home Loan Bank Board conducted a joint examination of its economic condition and projected a net loss in excess of $1.7 million and net worth deficiency of approximately $200,000 by the end of the fiscal year. Between late 1981 and mid-1983, Best and Bewick, joined later by Conarty, embarked on a course of desperate efforts to keep American afloat. It was those actions that eventually led to the insolvency of the association and gave rise to this prosecution.

By 1981, American and its subsidiaries, American Heritage Service Corporation ("Service"), Metrodyne, Incorporated ("Metrodyne"), and Landfinder's Realty Corporation ("Landfinder's"), had accumulated large holdings in real estate, primarily through foreclosure, known as "real estate owned" or "REO." Best wanted to get the REO off American's books because it was a non-earning asset and a drain on American's earning power. In addition to several other practices that violated the norms of the savings and loan industry, Best and Bewick would require borrowers to purchase REO from American and its subsidiaries as a condition of obtaining a loan. See Id., 913 F.2d at 1181. In so doing, Best and Bewick attempted to disguise the American's deteriorating financial status. They would apply as much of the loan as was necessary to cover the down payment for the purchase of the real estate. By this tactic, Best and Bewick, in effect, were selling American's real estate to the borrower--who typically was not creditworthy and known by Best and Bewick to be so--for no cash down. Moreover, they were selling this real estate at inflated prices, based on inflated appraisals, so that American could book a profit on the sales and thereby improve its balance sheet even though it was extremely unlikely that the borrower would be able to complete the payments for the property or that, when the borrower stopped making payments, the property could be sold for a price equal to the purchase price--or for that matter, equal to the loan. Id. While engaging in these reckless transactions, which predictably flopped, and while the bank was losing money hand over fist, Best and Bewick paid themselves large bonuses from the Landfinder's account. Id.

Conarty became involved when he joined American as its in-house counsel in early 1983. During that year, American made sizeable loans to a partnership, but two of the three partners were ineligible to borrow from the association because they had reached their loan limit. Conarty at least knew that one of the partners was in bankruptcy because he was one of that partner's creditors and had filed a claim in the bankruptcy proceeding. Id. The loan was made to enable the partnership to purchase and develop real estate owned by American, yet the proceeds of the loan were going to two of the partners to enable them to pay off pre-existing debts unrelated to the real estate project. This loan, therefore constituted a misuse of bank funds of which Conarty was aware and in which he participated.

As American's financial condition deteriorated, the Federal Home Loan Bank Board ("FHLBB"), which promulgates and enforces the rules and regulations that govern federally insured savings and loan associations, more carefully scrutinized American's lending practices. Between 1981 and 1983, Best and Bewick were able to keep the examiners at bay, in part by concealing the ultimate recipients of loan proceeds. Best's and Bewick's maneuvers to continue to manipulate the net worth of American allowed it to continue to operate approximately one year beyond the point of insolvency. It was only after an extensive review of the loan files and the other records of the association that the examiners were able to determine the true recipients of the loan proceeds. The FHLBB took control of American in 1984--an event that would have occurred much sooner if the true financial condition of American had not been concealed by Best and Bewick.

A jury trial commenced on April 20, 1987, in the United States District Court before the Honorable Nicholas Bua. After a seven-week trial, the jury found Best and Bewick guilty of all counts save one. The jury found Conarty guilty of six counts, including mail fraud, misapplication of savings and loan funds, and participation by a savings and loan officer in an improper loan. Four months later, Judge Bua sentenced Best to one year and a day in prison, three years probation, and five hundred hours of community service; Bewick to six months work release, three years probation, and five hundred hours of community service; and Conarty to three years probation and four hundred hours of community service.

All three defendants appealed. A panel of this court reversed the defendants' convictions and remanded the cause to the district court. We vacated that opinion and granted the government's petition for rehearing en banc to reconsider whether the jury's use of the government's binders during deliberations constitutes reversible error.

II.

Near the beginning of the trial, the government furnished each juror with a loose-leaf binder containing the key government exhibits arranged by transaction. The district court understood that the binders would be used to help the jury follow the descriptions of the various exhibits. See Transcript of Trial Proceedings ("Trial Trans.") at 677. Yet, because the exhibits in the binders had not yet been placed in evidence, the judge told the jurors not to look in the binders until a particular exhibit was admitted into evidence, and then to look only at that exhibit in the binder. He also told them to leave the binders in the jury box during recesses. See Id. at 678, 730. The binders remained in the jury box with the jurors throughout the trial. None of the defendants objected to this use of the binders by the jury. See Id. at 678.

When the trial ended, the binders were left by the jurors in the jury box. The district judge instructed the parties to review the exhibits and to agree on which exhibits were to be sent to the jury for deliberations. The various defense counsel and the prosecutors spent the morning of June 9, 1987, reviewing the many exhibits that the parties intended to send into the jury room. There were ten boxes of exhibits--nine boxes of government exhibits and one box of defense exhibits--lined up on the front row spectator bench in the courtroom. Defense counsel claim that the prosecutor promised them that the binders were not going to be sent to the jury room. The prosecutor denies ever making such a promise. See Affidavit of Prosecutor at 7. After resolving some minor issues regarding one or two of the exhibits, the judge directed that the exhibits entering the jury room be placed in the custody of the United States Marshal. Defense counsel then left the courtroom and the judge turned to other business. The prosecutor and the case agent from the FBI began loading all the exhibits, including the binders, onto a cart that the marshal wheeled into the jury room.

After the jury had been deliberating for four days, one of the defense counsel learned that the binders had been sent into the jury room and moved for a mistrial. See Trial Trans. at 5986. Defense counsel argued that the submission of the binders to the jury during deliberations...