U.S. v. Cederquist

• Decision Date: 16 April 1981
• Docket Number: No. 80-1018,80-1018
• Citation: 641 F.2d 1347
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. James Henry CEDERQUIST; Thomas G. Anderson; Donald Lee Federspiel; Hallcraft Homes, Inc., presently existing by reason of a merger as Nu-West Development Corporation of Arizona; Hallcraft Homes of Denver, Inc.; Hallcraft Homes of San Diego, Inc.; and Hallcraft Homes of Los Angeles, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1347

641 F.2d 1347

UNITED STATES of America, Plaintiff-Appellant, v. James Henry CEDERQUIST; Thomas G. Anderson; Donald Lee Federspiel; Hallcraft Homes, Inc., presently existing by reason of a merger as Nu-West Development Corporation of Arizona; Hallcraft Homes of Denver, Inc.; Hallcraft Homes of San Diego, Inc.; and Hallcraft Homes of Los Angeles, Inc. Defendants-Appellees.

No. 80-1018.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 7, 1980.

Decided April 16, 1981.

Dale Danneman, Asst. U. S. Atty., Phoenix, Ariz., for plaintiff-appellant.

Tom Karas, Phoenix, Ariz., argued for defendants-appellees; Stephen E. Silver, Phoenix, Ariz., on brief.

Appeal from the United States District Court for the District of Arizona.

Before GOODWIN and ANDERSON, Circuit Judges, and SWEIGERT, ^* District Judge.

J. BLAINE ANDERSON, Circuit Judge:

The district court dismissed the indictment against the defendants on the bases of prejudicial pre-indictment delay and prosecutorial misconduct before the grand jury. The government appeals those determinations. We now reverse.

I. FACTS

On December 28, 1978, a federal grand jury returned a fifteen-count indictment against four corporations Hallcraft Homes, Inc., presently existing by reason of a merger as Nu-West Development Corporation of Arizona, Hallcraft Homes of Denver, Hallcraft Homes of San Diego, and Hallcraft Homes of Los Angeles (who will be collectively referred to as Hallcraft), and three individuals who served as officers and employees of those corporations James Cederquist, Thomas Anderson, and Donald Federspiel. Each count of the indictment charged mail fraud, 18 U.S.C. § 1341, and aiding and abetting, 18 U.S.C. § 2. The indictment alleged that the defendants made use of the mails to defraud various banks through the operation of a check kiting scheme.

The purported scheme was alleged to have begun in October of 1973 and to have continued until the 16th of April, 1974. The United States Attorney's office was informed by the First National Bank of Arizona of a possible check kiting scheme by Hallcraft and its three subsidiaries on or about March 21, 1974. Grand jury subpoenas were issued to various lending institutions and the principal corporate defendants for records concerning, among other things, accounts, transactions, and loans involving Hallcraft. The subpoenas were issued in September of 1975; November of 1977; and December of 1977. After testimony was presented to the grand jury on December 27 and 28, 1978, an indictment was returned on December 28, 1978.

The defendants subsequently filed motions to dismiss the indictment because of pre-indictment delay and prosecutorial misconduct before the grand jury. Both motions were granted by the district court. ¹

II. DISCUSSION

A. Pre-indictment Delay

In determining whether a due process violating pre-indictment delay has occurred, three factors must be considered: (1) the actual prejudice caused to the defendants, (2) the length of the delay, and (3) the reason for the delay. United States v. Mays, 549 F.2d 670, 677-678 (9th Cir. 1977). Actual prejudice must be shown by the defendant as it is a prerequisite to finding a due process violation. United States v. West, 607 F.2d 300, 304 (9th Cir. 1979).

Where the claim is that evidence has been lost due to the delay, the defendant must demonstrate by definite proof that the loss is prejudicial to him. Id. This means that a defendant must at least show that the loss of the witness or documentation "has actually impaired his ability meaningfully to defend himself." United States v. Pallan, 571 F.2d 497, 501 (9th Cir.), cert. denied, 436 U.S. 911, 98 S.Ct. 2249, 56 L.Ed.2d 411 (1978).

The defendants claim that actual prejudice occurred because documentary evidence pertaining to substantial loans in process became unavailable due to the preindictment delay. They correctly stated that 18 U.S.C. § 1341 requires proof of specific intent to defraud. Williams v. United States, 278 F.2d 535, 537 (9th Cir. 1960). Thus "(e)ven where (a) defendant has knowledge of (a) lack of funds at the time the check is drawn, fraudulent intent is negatived by proof that he had a reasonable expectation that deposits would cover the check at the time it was presented for payment." Id. The defendants contend that the missing documents concerned loans in process and would have proved that they had a reasonable expectation that the checks would be covered before the checks were presented for payment. Thus they claim their ability to establish their defense of lack of fraudulent intent was prejudiced.

The government does not disagree that the lack of fraudulent intent would provide a defense to the charges. However, the government contends that proof that the loans were in process or that the missing documents even existed is indefinite and speculative.

The district court found the delay from 1974 to 1978 to be unconscionable and prejudicial "because the records that would have proved their position were no longer available." The district court's decision was also based in part upon the government's failure to produce records under a subpoena issued to Postal Inspector Smith. ²

The alleged missing documents may have provided the best means of proving their contentions that they had a reasonable expectation that loans would be granted. However, as the briefs of the defendants indicate, there are substitutes for the documents. The defendants' briefs refer to grand jury testimony by Postal Inspector Smith concerning a memo by First National Bank employee Lundquist, regarding a meeting held with the defendants on March 20, 1974. The meeting apparently concerned the defendants' overdraft situation and anticipated loans. The defendants also point to further grand jury testimony of Smith regarding a Lundquist memo of a March 21, 1974 meeting between the defendants and representatives of First National Bank, Colorado National Bank, and Union Bank. Apparently, at that meeting the defendants' overdraft situation and pending or anticipated loans to Hallcraft were also discussed.

We do not mean to suggest by the above discussion that those memos alone would demonstrate that there were loans in process. However, it does show that the alleged missing documents were not the only means by which the defendants could have presented their defense. For example, the defendants have not alleged that representatives of the various banks at the meetings of March 20 and 21, 1974, are no longer able to give testimony concerning those meetings. Nor have the defendants alleged that bank representatives with whom they dealt, in regard to the alleged loans in process, are unable to give testimony concerning those loans in process.

The dispositive issue is not whether the delay caused certain documents to become unavailable, but whether the delay has actually impaired the ability of the defendants to meaningfully present their defense. We determine that the district court erred in concluding that the defendants had established actual prejudice by the preindictment delay.

In reaching its decision on the motion for preindictment delay, the district court also ruled that "in view of the fact that the Government failed to produce the records under the subpoena (to Postal Inspector Smith), the Court will assume that the records were, as counsel has represented them to be, ..." (R.T. 64). Without deciding whether a district court may impose such sanctions in a criminal proceeding, we determine that the district court erred in the present case.

The government, in its motion to quash the subpoena, stated that the subpoenaed material was not in Smith's custody or control, but rather had long ago been turned over to the office of the United States Attorney. There is no indication in the record that the subpoenaed material was in the custody or control of Smith, and the district court made no finding to that effect.

Under Rule 17(g) of the Federal Rules of Criminal Procedure, noncompliance with a subpoena is deemed a contempt of court. However, before a person can be found in contempt, it must be shown that he had the ability to comply with the subpoena. United States v. Jacobs, 322 F.Supp. 1299, 1302 (C.D.Cal.1971). Even assuming that the district court could properly impose the type of sanction it did, no showing was made that Smith had the ability to comply with the subpoena. Thus there was no basis for the district court's sanction.

B. Prosecutorial Misconduct Before the Grand Jury

The task of a grand jury is to evaluate the law and facts presented to them and determine whether there is probable cause to believe that the charges brought against the defendant are true, such that the defendant should stand trial. Bracy v. United States, 435 U.S. 1301, 1302, 98 S.Ct. 1171, 1172, 55 L.Ed.2d 489 (Rehnquist, Circuit Justice, 1978). "An indictment returned by a legally constituted and unbiased grand jury, like an information drawn by the prosecutor, if valid on its face, is enough to call for a trial on the merits. The Fifth Amendment requires nothing more." Costello v. United States, 350 U.S. 359, 363, 76 S.Ct. 406, 408, 100 L.Ed. 397 (1955).

An indictment may be dismissed for prosecutorial misconduct before the grand jury. The dismissal may be based upon the Fifth Amendment Due Process Clause, United States v. Basurto, 497 F.2d 781, 785 (9th Cir. 1974), or upon the court's inherent supervisory powers. United States v. Chanen, 549 F.2d 1306, 1309 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83 (1977). While the goal in either case is to protect the integrity of the judicial process, the constitutionally-based independence of grand juries and prosecutors necessarily limits a court's review of grand jury proceedings. See United States v. Chanen, 549 F.2d at 1312-1313. Consequently, we have ruled that the "(d)ismissal of an indictment is required only in flagrant cases...