U.S. v. Denny, 90-5107

• Decision Date: 29 July 1991
• Docket Number: No. 90-5107,90-5107
• Citation: 939 F.2d 1449
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert O. DENNY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1449

939 F.2d 1449

UNITED STATES of America, Plaintiff-Appellee, v. Robert O. DENNY, Defendant-Appellant.

No. 90-5107.

United States Court of Appeals Tenth Circuit.

July 29, 1991.

Kathryn Phillips, Asst. U.S. Atty. (Tony M. Graham, U.S. Atty., Kenneth P. Snoke, Asst. U.S. Atty. on the brief), Tulsa, Okl., for plaintiff-appellee.

G. Steven Stidham of Sneed, Lang, Adams, Hamilton & Barnett, Tulsa, Okl., for defendant-appellant.

Before BALDOCK and BRORBY, Circuit Judges, and FINESILVER, ^* District Judge.

BRORBY, Circuit Judge.

Mr. Denny appeals his conviction of fourteen counts of violating the bank bribery statute, 18 U.S.C. Sec. 215. He asserts: (1) insufficiency of evidence; (2) improper admission of expert testimony; and (3) improper instruction.

Mr. Denny was an employee of an FDIC insured bank where he was in charge of trading various securities. Mr. Denny bought and sold securities not only for the bank but for two of the bank's customers utilizing the bank's funds, credit, and name. After the bank had bought or sold, Mr. Denny would enter upon the bank's books what trades were attributable to each of the two customers. The bank was aware it was buying from and selling securities to the two customers. However, the bank was unaware Mr. Denny was receiving one-half of the profits (no losses were ever realized) from both of the customers. The purchases and sales were frequently accomplished without orders from the customers. Mr. Denny utilized his own judgment as to when and what to sell or buy from the bank on the customers' behalf.

I

Mr. Denny asserts his conduct was not prohibited by the statute. While not articulated as such, Mr. Denny's claim is actually one of insufficiency of the evidence on the issue of whether his conduct amounted to the type of conduct proscribed by the statute.

The statute at issue, 18 U.S.C. Sec. 215(a)(2) reads, in pertinent part, as follows:

Whoever ... as an ... employee ... of a financial institution, corruptly solicits ... or corruptly accepts or agrees to accept, anything of value ... intending to be influenced or rewarded in connection with any business or transaction of such institution....

Section (c) of 18 U.S.C. Sec. 215 provides that the above quoted section of the statute shall not apply to "compensation paid ... in the usual course of business." To sustain a conviction under this statute, it therefore was incumbent upon the Government to prove beyond a reasonable doubt:

(1) the defendant was an employee of a financial institution;

(2) the deposits of the financial institution were insured by the FDIC;

(3) the defendant-employee corruptly accepted or agreed to accept something of value; and

(4) the defendant-employee did so intending to be rewarded in connection with a business or transaction of the financial institution.

There exists no dispute that Mr. Denny was an employee of an FDIC insured financial institution, and that he accepted something of value. Mr. Denny contends, however, that the Government's evidence failed to show the payments were accepted corruptly with the intent to be rewarded. Mr. Denny argues his share of the profits were not received for bestowing on the two customers any benefits they would not otherwise receive. In short, Mr. Denny argues he, as a banker, did not give favorable treatment in return for a bribe.

Definition of the word "corruptly" is not contained in the statute itself. The legislative history, however, incorporates the standard federal jury instruction, which defines the word "corruptly" as follows:

An act is done "corruptly" under this bank bribery statute if it is performed voluntarily and deliberately and performed with the purpose of accomplishing either an unlawful end or result or accomplishing some otherwise lawful end or lawful result by any unlawful method or means.

2 E. Devitt, C. Blackmar & K. O'Malley, Federal Jury Practice and Instructions Sec. 26.08 (4th ed. 1990).

"In evaluating a claim for insufficient evidence a court must view all the evidence, direct and circumstantial, as well as all reasonable inferences drawn therefrom, in the light most favorable to the government." United States v. Levario, 877 F.2d 1483, 1485 (10th Cir.1989) (footnote and citations omitted). We then determine whether, in light of the evidence presented, a rational trier of fact could have found the elements of the offense established beyond a reasonable doubt. Id.; see also Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979). Again, it was undisputed that Mr. Denny was an employee of an FDIC insured financial institution, and that he accepted something of value. At issue is whether the Government established beyond a reasonable doubt that Mr. Denny voluntarily and deliberately, with the purpose of accomplishing either an unlawful result or a lawful result by an unlawful method, accepted something of value intending to be rewarded or influenced in connection with some business or transaction of the bank.

Reviewing the evidence in a light most favorable to the Government, we find the following facts established thereby. Mr. Denny bought and sold securities from the bank where he was employed for the accounts of two customers, Mr. Morris and Mr. Applegate. Morris invested about $14,000 in his account. The other customer, Applegate, invested approximately $20,000 in his account. Mr. Denny was buying and selling securities for these two customers in denominations of $100,000 and $1,000,000. The price volatility of these instruments, Ginnie Maes and U.S. Treasury securities, could and did create huge gains and losses almost instantly. As all trading was done in the bank's name and with the bank's credit and money, it was the bank that risked liability exposure on these since the investments were relatively nominal in relation to the securities purchased. In return for their investments, Mr. Applegate made $27,000 in 1987 and $52,000 in 1988, and Mr. Morris made at least $20,000 in 1987 and more in 1988. Mr. Morris and Mr. Applegate each paid to Mr. Denny one-half of all their profits through a series of periodic checks (some of which were marked for fictitious purposes), and cash payments. ¹ At one point during the trading, the two customers had a combined unrealized loss position in excess of $200,000, which they could not have paid without suffering substantial financial hardship--quite possibly bankruptcy.

The evidence also established Mr. Denny was well aware he was prohibited, under written bank policies, from receiving profits from investment dealing. The evidence detailed the bank's exposure to liability as a result of Mr. Denny's conduct, which included market swings prior to settlement; rolling the loss over or extending the loss prior to settlement; the granting of an interest-free loan during this period; and discretionary trading without specified customer instruction, which would allow the customer to avoid the loss by claiming the trade was not authorized. Further, the evidence establishes that Mr. Denny kept secret his receipt of one-half of the profits from these customers, indicating his awareness that he was prohibited from engaging in such conduct.

Mr. Denny argues, in effect, that he was a partner with each of his two customers and the money he received was merely a split of the partnership profits and, therefore, the money paid to him was merely compensation paid in the usual course of business. We reject this argument. Mr. Denny secretly accepted money for wrongfully engaging in discretionary trading utilizing the funds and credit of his employer, the bank. The money received by Mr. Denny was not compensation paid in the usual course of business. Without the wrongful use of bank funds and credit there would have been no profits. The jury considered Mr. Denny's argument that he received no reward, just a share of the profits, and rejected this characterization of the facts. An equally plausible and more probable inference is that Mr. Denny received one-half of the profits as his reward for generating profits by the wrongful use of bank funds and credits.

Mr. Denny suggested to Mr. Morris and Mr. Applegate that if each opened an account with the bank, he would trade securities on their behalf. Mr. Denny did not trade with broker/dealers on behalf of his customers; rather, he traded with the bank. These trades were unlawful as applicable rules prohibited such discretionary trading. Mr. Denny did not contribute his own capital to those "partnerships," nor did he supply any other form of value except his services as a bank employee and ability to trade securities utilizing the bank's name, funds and credit. Mr. Morris and Mr. Applegate secretly rewarded Mr. Denny by giving him one-half of their profits. Mr. Denny gave to Mr. Morris and Mr. Applegate his ability and power to trade bank assets for their benefit. The evidence is sufficient to sustain the conviction.

The statute does not require establishing that the bank suffered a loss. In the case before us, the bank was paid a commission and theoretically made a profit on each trade. This is legally insignificant. The gravamen of the offense set forth in 18 U.S.C. Sec. 215 is that a bank employee deliberately commit an unlawful act, or a lawful act by unlawful means, in connection with bank business intending to be rewarded for accomplishing this act. The evidence and the inferences drawn therefrom clearly show Mr. Denny violated the statute.

II

Mr. Denny next contends the trial court wrongfully allowed an expert witness to testify he was "guilty." When reviewing a district court's evidentiary rulings, we will not reverse absent an abuse of discretion. United States v. Bonnett, 877 F.2d 1450, 1458 (10th Cir.1989). Abuse of discretion lies where we develop a definite and firm conviction that the trial court made a clear error of judgment or exceeded the bounds of permissible choice under the circumstances. I...