U.S. v. Eden

• Decision Date: 26 October 1981
• Docket Number: No. 80-1468,80-1468
• Citation: 659 F.2d 1376
• Parties: 9 Fed. R. Evid. Serv. 501 UNITED STATES of America, Plaintiff-Appellee, v. Thomas L. EDEN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1376

659 F.2d 1376

9 Fed. R. Evid. Serv. 501

UNITED STATES of America, Plaintiff-Appellee, v. Thomas L. EDEN, Defendant-Appellant.

No. 80-1468.

United States Court of Appeals Ninth Circuit.

Argued and Submitted July 9, 1981.

Decided Oct. 26, 1981.

Vincent J. Marella, Bird & Marella, Beverly Hills, Cal., for defendant-appellant.

Curtis B. Rappe, Los Angeles, Cal., for plaintiff-appellee.

Appeal from the United States District Court For the Central District of California.

Before HUG and FARRIS, Circuit Judges, and CLAIBORNE, ^* District Judge.

CLAIBORNE, District Judge:

On April 9, 1980, a federal grand jury for the Central District of California returned an eleven count indictment charging Thomas L. Eden with violations of 18 U.S.C. § 641, embezzlement and conversion of government funds (seven counts), and 18 U.S.C. § 1001, concealing material facts from the Department of Health, Education and Welfare (four counts).

Upon learning that a superseding indictment against the defendant was forthcoming, counsel for Eden moved the trial court for an order requiring certain exculpatory material (results of a polygraph test taken by defendant) to be presented to the grand jury. Eden's motion was denied and the grand jury returned a superseding eleven count indictment on May 30, 1980.

Eden was a founder and president of Associated Colleges of California, referred to during trial as A.C.C., a business college which participated in student financing under the Federally Insured Student Loan (F.I.S.L.) program through what was then the Department of Health, Education, and Welfare. A.C.C. participated in four separate educational programs which were the subject of the grand jury investigation: 1) the Supplemental Educational Grants Program (S.E.O.G.), 2) the College Work Study Program (C.W.S.), 3) the National Direct Student Loan Program (N.D.S.L.), and 4) the Basic Educational Opportunity Grants Program (B.E.O.G.).

In 1974, A.C.C. experienced "cash flow" problems and was forced to take out a loan in the approximate amount of $130,000 from Union Bank, repayment of which was personally guaranteed by defendant. A.C.C.'s financial difficulties continued, and in July, 1975, defendant sold A.C.C. to Urban Didier, with the provision that Didier was to assume personal liability for A.C.C.'s $130,000 loan from Union Bank.

When A.C.C. first began participating in Federally Insured Student Loan programs, a number of special bank accounts, in addition to its general account, were established at Union Bank to handle the funds received from H.E.W. As president of A.C.C., Eden was a signatory on all checks.

In September, 1975, Eden became aware that Didier had not executed the necessary loan assumption documents and defendant was still personally liable on the $130,000 A.C.C. loan at Union Bank. Eden closed out all of the old accounts, including the N.I.H. and special program accounts, and transferred those funds into a new general account at Union Bank, which was the only new account opened. The total funds transferred amounted to $96,821.12, which was offset by a deficit balance of $17,309.60 in the old general account.

Eden testified he believed the above funds could be properly transferred from the special program accounts into the new A.C.C. general account because defendant believed the funds belonged to A.C.C. Donna Palmer, the Coordinator of Financial Aid at A.C.C., testified she had shown the applicable H.E.W. regulations to defendant which mandate that under no circumstances could federal money be put directly into the A.C.C. general account from the various special program accounts. On or about September 22, 1975, upon learning that A.C.C. was closing down, Donna Palmer informed defendant that all allowable disbursements of special program funds had been made and that the remaining $100,000 had to go back to the federal government. Instead, Eden drew certain checks on said accounts made payable to various individuals who in turn cashed the checks and delivered the bulk of the funds back to Eden.

At trial, defendant admitted the acts alleged in the indictment, but testified the checks were issued and the funds returned so that he could make payments on the A.C.C. loan at Union Bank without Didier knowing. The $130,000 loan at Union Bank was paid in full by June, 1976. A.C.C. closed for semester break in September, 1975 and never reopened.

Concluding a six-day trial, Eden was found guilty by a jury on all eleven counts of the superseding indictment, from which he appeals and assigns six errors: 1) The jury was improperly instructed as to the definition of embezzlement and conversion; 2) The jury was improperly instructed that the funds alleged in Counts One through Seven of the indictment constituted government property as a matter of law; 3) The trial court improperly quashed defendant's subpoena to the Secretary of Education; 4) The trial court erred in refusing to admit into evidence the results of a polygraph examination of the defendant; 5) The trial court erred in refusing to compel the government to present exculpatory evidence to the grand jury, including the results of a polygraph examination of the defendant; 6) The jury's verdict was not supported by sufficient evidence.

1) Was the jury improperly instructed as to the definition of conversion?

The trial court gave the following instruction on conversion:

To convert money or property to one's own use or to the use of another means to apply, appropriate, or use, such money or property for the benefit of the wrongdoer or another.

Conversion includes misuse or abuse of property as well as use in an unauthorized manner or to an unauthorized extent.

Eden attacks this instruction as completely negating the government's burden to prove specific intent and provided the jury with a confusing and incorrect definition of conversion. We agree that the instruction, standing alone, gives an incomplete and therefore inaccurate definition of conversion.

The government proposed the instruction which was given by the court. It is conceded in the briefs that the instruction is a modified version of § 16.01 Devitt and Blackmar, Federal Jury Practice and Instructions and founded on Morissette v. United States, 342 U.S. 246, 72 S.Ct. 240, 96 L.Ed. 288 (1952).

The corpus of the modification was taken from the following language in Morissette :

The books contain a surfeit of cases drawing fine distinctions between slightly different circumstances under which one may obtain wrongful advantages from another's property. The codifiers wanted to reach all such instances. Probably every stealing is a conversion, but certainly not every knowing conversion is a stealing. "To steal means to take away from one in lawful possession without right with the intention to keep wrongfully." Irving Trust Co. v. Leff, 253 N.Y. 359, 364, 171 N.E. 569, 571. Conversion, however, may be consummated without any intent to keep and without any wrongful taking, where the initial possession by the converter was entirely lawful. Conversion may include misuse or abuse of property. It may reach use in an unauthorized manner or to an unauthorized extent of property placed in one's custody for limited use. (Emphasis added.) Money rightfully taken into one's custody may be converted without any intent to keep or embezzle it merely by commingling it with the custodian's own, if he was under a duty to keep it separate and intact. It is not difficult to think of intentional and knowing abuses and unauthorized uses of government property that might be knowing conversions but which could not be reached as embezzlement, stealing or purloining. Knowing conversion adds significantly to the range of protection of government property without interpreting it to punish unwitting conversions.

A fair reading clearly shows that the above was a recitation of examples nothing more. The court did not equate misuse with conversion nor did it hold that any misuse or abuse of property or use in any unauthorized manner automatically constitutes conversion and it did not undermine the need for a finding of a serious violation of the owner's right to control the use of the property. United States v. May, 625 F.2d 186, 192 (8th Cir. 1980).

Indeed, the court held to the contrary, stating at page 254:

Had the statute applied to conversions without qualification, it would have made crimes of all unwitting, inadvertent and unintended conversions. Knowledge, of course, is not identical with intent and may not have been the most apt words of limitation. But knowing conversion requires more than knowledge that defendant was taking the property into his possession. He must have had knowledge of the facts, though not necessarily the law, that made the taking a conversion. In the case before us, whether the mental element that Congress required be spoken of as knowledge or as intent, would not seem to alter its bearing on guilt. For it is not apparent how Morissette could have knowingly or intentionally converted property that he did not know could be converted, as would be the case if it was in fact abandoned or if he truly believed it to be abandoned and unwanted property.

And at pages 254 and 255:

The purpose which we here attribute to Congress parallels that of codifiers of common law in England and in the States and demonstrates that the serious problem in drafting such a statute is to avoid gaps and loopholes between offenses. It is significant that the English and State codifiers have tried to cover the same type of conduct that we are suggesting as the purpose of Congress here, without, however, departing from the common law tradition that these are crimes of intendment.

We find no grounds for inferring any affirmative instruction from Congress to eliminate intent from any offense with which this defendant was charged.

The second paragraph of the instruction does not clearly state the applicable principles and should...