U.S. v. Cahill, 89-1208

• Decision Date: 10 December 1990
• Docket Number: No. 89-1208,89-1208
• Citation: 920 F.2d 421
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Eugene J. CAHILL, Sr., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 421

920 F.2d 421

UNITED STATES of America, Plaintiff-Appellee, v. Eugene J. CAHILL, Sr., Defendant-Appellant.

No. 89-1208.

United States Court of Appeals Seventh Circuit.

Argued Jan. 8, 1990.

Decided Dec. 10, 1990.

Thomas M. Durkin, Asst. U.S. Atty., Chicago, Ill., for plaintiff-appellee.

Stephen E. Tinkler, Denver, Colo., for defendant-appellant.

Before POSNER, RIPPLE, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Eugene J. Cahill, Sr., the president and primary shareholder of Reliance Mortgage Company ("RMC"), and his purported co-conspirators, Donald Ceaser and William Powers, both officers of First Financial Savings & Loan of Downer's Grove, Illinois ("First Financial"), were charged with crimes involving three interrelated schemes to defraud First Financial. The thirty counts against Cahill involved allegations of mail fraud, wire fraud, interstate transportation of money obtained by fraud, false statements to the government, aiding and abetting bank officers in numerous bank misapplications, as well as racketeering. Through the alleged schemes, Cahill's mortgage company, RMC, obtained the use of $13.4 million of First Financial funds, while Powers and Ceaser procured $2.8 million of the thrift's money for their personal use and benefit.

The underlying facts of this case came to light as a result of the April, 1982 collapse of First Financial Savings & Loan, a thrift institution insured by the Federal Savings and Loan Insurance Corporation ("FSLIC"). In the aftermath of the collapse, federal regulators took over First Financial and Gerald Chapman, Deputy Chief of the Enforcement Section of the Federal Home Loan Bank Board ("FHLBB"), initiated an inquiry into the causes of the thrift institution's failure. During the investigation, the banking examiners scrutinized the relationship between First Financial and one of its institutional customers--RMC, the Colorado mortgage-banking firm headed by Cahill.

In the fall of 1982, Chapman met with Cahill and reached an agreement which provided the FHLBB with open access to RMC's offices, files, and employees. Soon after, Chapman, Jack Troia, the FHLBB accountant, and John Conlon, a lawyer representing the FSLIC, reviewed RMC's records and discussed them with Cahill. Noting some irregularities, on January 17, 1983, Chapman sent a criminal referral letter to the United States Attorney's office in Chicago, Illinois. In the letter, Chapman concluded that Powers and Ceaser had committed criminal acts--but only suggested that Cahill also might have violated the law. As a result of the letter, Assistant United States Attorney John H. Newman was assigned to the case. After learning of Chapman's investigation, Newman contacted and met with Chapman in mid-February.

On March 1, 1983, Chapman, on behalf of the FHLBB, took Cahill's deposition [the March 1, 1983 Statement] in order to aid Chapman in his efforts to obtain a "Removal and Prohibition Order" against Powers and Ceaser. At the time of the deposition, Chapman neither informed Cahill of the criminal referral letter nor advised him that his deposition testimony would be forwarded to the U.S. Attorney's office.

Later that month, Newman called Chapman to discuss the FHLBB investigation of First Financial. During the call, Newman stressed to Chapman that the U.S. Attorney's office's investigation would be "separate," that Newman would only receive information from Chapman, that Newman would not disclose any information to Chapman, that Chapman and Newman would be as "ships in the night," and that Chapman was "on his own." Newman followed up his phone call with a letter memorializing their conversation and restating the ground rules regarding the relationship between the FHLBB investigation and any criminal investigation by the U.S. Attorney's office. Accordingly, the letter confirmed that "any investigation which may be undertaken by this office or the grand jury, will be separate, distinct and independent" from the FHLBB investigation.

Over the next several months, Cahill continued to cooperate with Chapman, Troia, and Conlon. And, when a grand jury subpoena was issued for the production of RMC business records on July 21, 1983, Newman held discussions with Anthony Accetta, Cahill's attorney, regarding the production of those records. During their telephone conversation, Newman assured Accetta that Cahill was not presently a target or subject of the criminal investigation.

In early September of 1983, Cahill and Accetta met briefly with Roy Lane, an FBI agent. At the meeting, Cahill informed Lane that he would voluntarily provide a statement to the FBI [the September 7, 1983 Statement]. After the meeting Accetta again asked Newman about Cahill's status. Noting that he was just beginning the case, Newman stated that "as of now" Cahill was "not a subject of a criminal investigation" but noted that Cahill's status "could change."

Over the next year, the grand jury investigation into the collapse of First Financial continued. Throughout this period, Cahill continued to cooperate with the civil investigation. On October 2, 1984, Accetta again asked Newman if Cahill was a subject of the criminal investigation. Although Newman testified that, at that time, he still viewed Cahill as a witness and not a subject of the criminal investigation, Accetta testified that he had two contradictory conversations with Newman on the date in question. In the first telephone conversation, Accetta claimed that Newman maintained that Cahill was a subject of the original criminal investigation, but later called back to let him know that while Cahill was not a subject, there were "troubling things" about Cahill's previous statements that did not make sense.

On October 10, 1984, Newman had a day-long meeting with Troia and Conlon. After that meeting, Newman testified that the "world ... changed" concerning his view of Cahill and his role in the First Financial collapse. Subsequently, Newman sought to make arrangements to obtain RMC's records.

At the November 8, 1984 meeting with the accountant and Chapman, Cahill, along with his attorney Silver, was told that his explanations of events were unbelievable and that it appeared he had criminal culpability. During the meeting, Silver noted that he was not a criminal attorney and that he wanted to get immunity for Cahill. In response, Newman told Cahill and Silver that immunity was inappropriate and would not be discussed at that time. Rather, Cahill should determine whether he wanted to make a "proffer of evidence."

At this time, Newman clearly emphasized the difference between immunity and a proffer of evidence. He stressed that a person making a proffer of evidence did not necessarily receive immunity and that he, Newman, did not have the power or authority to act on any immunity request. Moreover, he explained that although Cahill's proposed proffer statement could not be used in the government's case-in-chief, it could be used against Cahill if he ever testified differently and that the government was free to pursue any leads it derived from the statement.

After listening to Newman's presentation, Cahill decided to provide testimony to the government prosecutor. Later that afternoon, Cahill and Silver returned to Newman's office to read and to sign the proffer letter [the November 8, 1984 Statement]. Among its other terms and conditions, the proffer letter also stated that "no other promise or agreement" existed between Cahill and the government.

On November 9, 1984, Cahill again appeared at Newman's office and repeated his previous testimony, but also added that he had given $30,000 in cash "gifts" to Ceaser prior to the collapse of First Financial [the November 9, 1984 Statement].

During the period from November 1984 to May 1985, Newman came to believe that Cahill had not been truthful in his March 1, 1983 Statement to Chapman or in his September 7, 1983 and November 9, 1984 Statements to Lane. Consequently, when Silver called Newman on May 9, 1985, Newman told him that it appeared that Cahill would be indicted. Concerned by this development, Silver set up a meeting between Cahill and Newman for May 14, 1985.

On May 14, Cahill appeared at the U.S. Attorney's office, alone. During a meeting with Newman and FBI agent Lane conducted under the same terms and conditions of the original proffer letter, Cahill admitted to various facts surrounding the three fraud schemes related to First Financial [the May 14, 1985 Statement]. At the same time, Cahill reiterated his belief that he had done nothing wrong. The next day, Cahill again called Newman and repeated his desire to obtain a grant of immunity. And, once again, Newman stated that all discussions with Cahill were pursuant to the 1984 proffer letter and that immunity was not appropriate in this case.

Cahill was subsequently indicted on December 5, 1985 on charges of conspiring to defraud First Financial.

Prior to the start of his trial, Cahill filed a motion to dismiss the indictment against him and requested an evidentiary hearing. In his motion to dismiss and at the evidentiary hearing, Cahill alleged that Newman had orally granted him "transactional immunity" at a meeting attended by Cahill, his attorney, Newman and Lane. In addition, Cahill sought to suppress four statements he had made to the various government agents, and any evidence derived from them, on the grounds that they had been made involuntarily. He also alleged that the civil and criminal investigations had been unlawfully commingled. Cahill also charged that seven people violated his constitutional rights during the period between the collapse of First Financial and his indictment.

In response to Cahill's charges, each of the seven persons filed affidavits denying his allegations. And, at the evidentiary hearing, five of the seven testified, denying the allegations. During the hearing, the evidence presented included the testimony of Cahill,...