Jennings v. United States

• Decision Date: 15 October 2012
• Docket Number: No. 11–3127.,11–3127.
• Citation: 696 F.3d 759
• Parties: Loren George JENNINGS, Petitioner–Appellant v. UNITED STATES of America, Respondent–Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

696 F.3d 759

Loren George JENNINGS, Petitioner–Appellant

v.UNITED STATES of America, Respondent–Appellee.

No. 11–3127.

United States Court of Appeals,

Eighth Circuit.

Submitted: May 18, 2012.

Filed: Oct. 15, 2012.

Daniel Martin Scott, argued and on the brief, Douglas A. Kelley, on the brief, Minneapolis, MN, for appellant.

Douglas A. Kelley, on the brief, Minneapolis, MN, for Appellant.

Joseph T. Dixon, III, Special AUSA, argued and on the brief, Minneapolis, MN, for appellee.

Before LOKEN and BEAM, Circuit Judges, and PERRY ¹, District Judge.

PERRY, Chief District Judge.

Loren George Jennings was convicted of two counts of mail fraud and one count of money laundering in 2005. His conviction and sentence were affirmed on direct appeal. See United States v. Jennings, 487 F.3d 564 (8th Cir.2007). After the Supreme Court issued its opinion in Skilling v. United States, ––– U.S. ––––, 130 S.Ct. 2896, 177 L.Ed.2d 619 (2010), Jennings filed a motion to vacate his conviction under 28 U.S.C. § 2255, which the district court ² denied as procedurally barred. Jennings appeals, arguing that his claim was presented in his direct appeal and that, in any event, he is actually innocent of the crime for which he was convicted. We affirm.

I. BACKGROUND

The complete facts of this case are discussed in the opinion affirming Jennings's conviction and sentence on direct appeal. See Jennings, 487 F.3d 564. A brief summary of the facts relevant here will suffice.

Jennings was a Minnesota state representative from 1984 through 2002. He served on the House Regulated Industries Committee, including serving at times as chairman or the ranking minority member. He also had a partnership interest in two companies: M & M Sanitation (M & M) and C & J Properties (C & J). One of Jennings's other business associates, John James, was a banker at Town & Country Bank in Almelund, Minnesota. The bank had previously made a loan to a company called Poletech, which had been working to develop “hollow veneer” utility poles. By the time of Jennings's involvement, the Poletech loan had become a problem loan. Banker James formed a company called Northern Pole to purchase Poletech's assets, and he asked Jennings to make a “bridge loan” to Northern Pole. To do this, Jennings caused M & M to borrow $315,000 from Town & Country Bank in April 1997; M & M then lent those funds to Northern Pole. Jennings personally guaranteed the loan in order to get his partners' consent. Northern Pole gave M & M a promissory note, which was extended several times but never paid down. This loan was not reported in M & M's financial statements. In April 1998, C & J borrowed an additional $355,000 from Town & Country Bank and made a loan in that amount to Northern Pole, again personallyguaranteed by Jennings. Jennings thus had personally guaranteed a total of $670,000 in loans from M & M and C & J to Northern Pole.

In the summer of 1998, Northern Pole suffered a fire at its work site and changed its business enterprise from developing hollow poles to researching new recycling methods for the utility poles currently in use. In order to get funding for the struggling company, Jennings used his political position to sponsor and pass a bill in the Minnesota legislature amending the Conservation Improvement Program (CIP) in a way that would benefit Northern Pole. The CIP used surcharges from utility customers to fund conservation projects. The amendment made research projects such as Northern Pole's eligible for CIP funds.

After the CIP amendment was passed, Jennings approached two Minnesota utility companies, NSP and Minnesota Power, to see if they would provide CIP funds to Northern Pole. Jennings told the utility companies that he was working on behalf of a constituent and that he had no other interest in Northern Pole. The utilities decided to award money to Northern Pole; testimony showed that the decision was made primarily because of Jennings's political power and influence. When each CIP payment was awarded, Northern Pole paid part of the money directly back to M & M and C & J to repay the loans that Jennings had personally guaranteed. Because CIP payments are public funds, they must be approved by the Minnesota Department of Commerce. In May 2000, Jennings, James, and the acting president of Northern Pole fabricated a report for the Department of Commerce, accounting for the use of its CIP funds. In reality, the only work done by Northern Pole for the utility companies was preparation of a three-ring binder of research, which was merely a summary of research already done in the field. It had been compiled by the acting president's daughter-in-law. By 2002, the CIP funds that had been awarded to Northern Pole totaled $650,000, of which $284,398 was used to make payments directly to M & M and C & J.

At trial, Jennings was convicted of two counts of mail fraud (using an honest-services fraud theory) and one count of money laundering. He was sentenced to 48 months' imprisonment and ordered to pay restitution in the amount of $284,398, the amount of money from the scheme that personally benefitted him, and to forfeit the same amount to the government. His conviction was affirmed on appeal. Jennings, 487 F.3d 564. After the United States Supreme Court decided Skilling, Jennings filed a motion under 28 U.S.C. § 2255. Jennings argued in his § 2255 motion that his honest-services mail fraud conviction was not valid after Skilling, because the evidence at his trial did not show that bribes or kickbacks were involved. The district court denied the § 2255 motion, holding that the claim was procedurally barred because Jennings did not raise it on direct appeal. The judge granted a certificate of appealability on the issue of whether Jennings's conviction must be set aside based on Skilling.

II. DISCUSSION

This court reviews a district court's denial of a § 2255 motion de novo. Hodge v. United States, 602 F.3d 935, 937 (8th Cir.2010). “Habeas review is an extraordinary remedy and will not be allowed to do service for an appeal.” Bousley v. United States, 523 U.S. 614, 621, 118 S.Ct. 1604, 140 L.Ed.2d 828 (1998) (internal quotation marks and citations omitted). Thus, a petitioner may not raise an issue before the district court for the first time in a § 2255 motion if the issue was not presented on direct appeal from the conviction.See Matthews v. United States, 114 F.3d 112, 113 (8th Cir.1997). “Where a defendant has procedurally defaulted a claim by failing to raise it on direct review, the claim may be raised in habeas only if the defendant can first demonstrate either ‘cause’ and actual ‘prejudice,’ or that he is ‘actually innocent.’ ” Bousley, 523 U.S. at 622, 118 S.Ct. 1604 (internal citations omitted).

As relevant to this count of conviction, Jennings raised the following arguments on his direct appeal: (1) the evidence was insufficient to prove that he had a duty to disclose his interest in Northern Pole; (2) the jury instructions were erroneous because the jury should have been instructed that the government was required to prove his violation of a state law; (3) the jury instructions were erroneous because the jury should have been instructed that the government was required to prove gain or loss in an honest-services mail fraud scheme; (4) the district court erred in two evidentiary rulings; (5) the district court erred in the amount of its forfeiture order because forfeiture was only authorized for the money laundering offense, not the mail fraud offenses; and (6) the district court erred by applying the sentencing guideline for honest-services fraud rather than the guideline for conflict of interest or receipt of unauthorized compensation. See Jennings, 487 F.3d 564.

In Skilling, the Supreme Court held that honest-services fraud under 18 U.S.C. § 1346 is limited to schemes involving bribery or kickbacks. 130 S.Ct. at 2931. Skilling was a former Enron executive charged with wire fraud for depriving Enron and its shareholders of the intangible right of his honest services. Id. at 2907–08. Skilling argued on appeal that 18 U.S.C. § 1346 is unconstitutionally vague. Id. at 2926. The Supreme Court agreed that the statute may be unconstitutionally vague if not limited in some way, but held that it passed constitutional muster when confined to cover only schemes involving bribery or kickbacks. Id. at 2931. The Court concluded that Skilling's conduct did not fall within the statute because his scheme did not involve bribery or kickbacks. Id. at 2934.

The main argument in Jennings's § 2255 motion was that his conduct was not unlawful under Skilling's new interpretation of honest-services mail fraud because the evidence supporting his conviction did not involve bribes or kickbacks. The district court held that Jennings had procedurally defaulted this argument by failing to raise it on direct appeal. Although the district court recognized that Jennings's argument was based on Skilling, which was decided after his direct appeal had been denied, Jennings could have at any time raised the same legal issue that had been raised in Skilling: that the honest-services fraud statute was unconstitutionally vague and should be limited to cases involving bribes or kickbacks.

Jennings now argues that he did raise the same argument presented in Skilling on his direct appeal; he thus argues that this claim is not procedurally barred. In his direct appeal, Jennings argued generally that 28 U.S.C. § 1346 did not encompass his conduct. Specifically, he argued that it did not reach his conduct because he did not violate state disclosure laws or any other duty to disclose his interest in Northern Pole. Thus, Jennings claims that he made the same basic argument as that presented in Skilling: that the statute did not criminalize his conduct.

The government responds that the argument made in Skilling was not as broad as Jennings proposes. In Skilling, the appellant argued that 28 U.S.C. § 1346...